Why is NVIDIA a big winner under the artificial intelligence industry boom?

Since ancient times, the hero has been created, and the giants have come out. Under the industrial boom of artificial intelligence, NVIDIA is undoubtedly the biggest winner in the global technology industry in 2016.

The stock price has tripled in a year, CES showcases the limelight, and the net profit growth in FY2017 is strong. Google, Microsoft, Facebook, Amazon, Tesla and almost every AI startup are using NVIDIA chips... For many years, semiconductor companies have continued to attract investors, entrepreneurs and the media.

However, what is more worthy of attention than glory is the growth process, business layout, business approach and future growth space behind it. Through analysis of Nvidia's development history, product business, market competition, and major operational and financial indicators, Love Analysis summarizes the business behind its success and estimates its future growth space. It is now shared with you.

Development history

In the development of Nvidia, there have been four major setbacks.

Why is NVIDIA a big winner under the artificial intelligence industry boom?

Chart: Changes in NVIDIA's revenue from 1996-2016

The first time it happened at the beginning of the company, due to “untimely”, the first product suffered a market failure once it was launched. The other three were in 2002-2003, 2007-2009, and 2012-2013. Behind these setbacks, there are giant games, there are market competitions, and there are also painstaking efforts to persist. Every setback is a lively commercial practice class, which makes NVIDIA more and more frustrated and growing.

Not a good teacher

In April 1993, Huang Renxun, from IC manufacturer LSI Logic, co-founded NVIDIA with two young engineers from Sun, Chris Malachowsky and CurTIs Priem. Their original intention was to develop a special chip to speed up video games. The rendering speed of the 3D image brings a more realistic display.

In May 1995, after two years of polishing, Nvidia launched the first multimedia accelerator for game consoles, the NV1. This accelerator integrates functions such as graphics processing, sound card and game joystick. Once released, it attracted the biggest game at that time. The eyes of the manufacturer Sega. Sega decided to adopt NV1 on its sixth-generation home console "Saturn" and personal computers.

However, in the same year, Microsoft introduced Windows 95, which features a graphical user interface (GUI). The mainstream market for graphics chips has shifted from game consoles to PCs. At the same time, Microsoft has developed a graphical programming interface using polygon imaging technology—Direct3D. standard.

Since NVIDIA developed NV1, there is no polygon 3D standard like Direct3D and OpenGL (3D drawing programming interface developed by SGI), and NVIDIA adopts quadratic texture map as a stereoscopic image implementation, which is incompatible with the industry. General standards, so market sales have fallen rapidly.

In the first quarter of 1996, Nvidia stopped selling NV1 and discontinued the development of NV2, and began to shift its focus to the graphics processor RIVA128. In the following two years, NVIDIA launched RIVA128, RIVA128ZX, RIVATNT and other graphics processors. These new products not only support Microsoft Direct3D and OpenGL standards, but also surpass the competitors of 3Dfx's Voodoo and ATI's Rage Pro in terms of energy efficiency, and the low price has gradually gained the favor of the whole machine factory.

In January 1999, NVIDIA's annual revenue exceeded $150 million and was listed on NASDAQ. In May of the same year, its graphics processor sales exceeded 10 million. In August, NVIDIA launched the first GeForce 256, the GeForce-named display core, and introduced the GPU concept for the first time. At the end of the year, Nvidia officially became the industry leader with $70 million in cash and 1 million shares in the company.

At this time in the GPU market, only one competitor can compete with Nvidia, which is ATI.

Revival and eagerness

In the PC market, Microsoft and Intel are the two giants that Nvidia can't. "There is no eternal friend, only eternal interest." This is the eternal law of the mall. The game with ATI and the two giants also affects the success or failure of NVIDIA business.

In 2000, in order to enter the game console industry, Microsoft found the Ninestars, and asked them to develop Xbox graphics chips, SoundStorm sound chips and motherboard solutions. However, Microsoft gave only one year of research and development. During the period, there were a series of reasons such as bugs in the power supply and insufficient database functions, which caused the Xbox to enter the production phase two months before the launch date. In the end, Microsoft was forced to postpone the start, missed the opportunity and lost to the Sony PS2.

In order to compete with the PS2, Microsoft intends to reduce the price of the Xbox II product host, so NVIDIA is required to reduce the price of the chip as much as possible. But the chip profit itself was not high at the time, Huang Renxun did not agree, and later the chip encountered a quality control problem, resulting in higher costs, but also forced to reduce performance. The contradictions between the two sides have intensified, and the court is finally in court. After that, Microsoft handed the order to NVIDIA's rival ATI.

The failure of this cooperation made Nvidia pay a painful price. Not only did the 2003 revenue decrease, but it also missed the important news of the Microsoft DirectX 9 specification, which directly led to the GeForce FX that was launched that year lost to ATI's Radeon 9700 due to compatibility issues. More unfortunately, GeForce FX still has problems with excessive operating temperatures, causing multiple spontaneous combustion accidents. Huang Renxun was once ridiculed by gamers as "two bombs."

In addition to Microsoft, Intel also began to support ATI, under the cousin of the giant, Intel suffered heavy losses, the stock price fell. After seeing the power of the giants, in order to achieve breakout, Nvidia took the initiative to find Microsoft reconciliation and strive to cooperate again; on the other hand, lost the Xbox order and tried to win the Sony PS3 order. In addition, the high-performance chip continues to push over ATI, and it has also reached a patent cross-licensing agreement with Intel.

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