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IMD
15.04.2019

NVIDIA: WINNING THE DEEP-LEARNING LEADERSHIP BATTLE

Researcher Lisa Duke together NVIDIA looked forward to a future of rapidly expanding potential for
with Sonia Tan, Christopher its technologies in artificial intelligence (AI). Yet, the company’s
Read and Rathan Kinhal (IMD success and the rising stakes in achieving dominance in AI were
EMBA 2018), prepared this attracting many new competitors. The big question was how should the
case under the supervision of company position itself to continue to survive and thrive in the
Professor Michael Watkins as a unfolding AI revolution?
basis for class discussion rather
than to illustrate either effective Jen-Hsun Huang founded NVIDIA in 1993 to produce leading-edge
or ineffective handling of a graphics processing units for powering computer games. The company
business situation. grew rapidly to become the dominant player in the design and marketing
of graphics processing units (GPUs) and cards for gaming and
computer-aided design, as well as multimedia editing. More recently the
company had diversified into building system-on-a-chip (SoC)
solutions for researchers and analysts focused on AI, deep learning and
big data, as well as cloud-based visual computing. In addition,
NVIDIA’s processors increasingly provided supercomputing
capabilities for autonomous robots, drones and cars.

Though it was at the forefront of GPUs and SoCs, NVIDIA’s position

in AI was being threatened by the likes of Google, Intel, AMD and a
host of Silicon Valley start-ups keen on challenging the company’s
dominance in the field. The company’s early successes in chips for self-
driving cars was also being threatened, not only by Intel but also by
customers such as Tesla that had announced it would be developing its
own technologies.

The key question facing NVIDIA was: Would the lessons learned from
its origins to its current position prove to be a strong roadmap for
building NVIDIA into an AI platform company? What strategic choices
would the senior team have to make? Fundamentally, what would
NVIDIA need to do to tactically win against these competitive threats?

Copyright © 2019 by IMD - International Institute for Management Development, Lausanne,

Switzerland (www.imd.org). No part of this publication may be reproduced, stored in a retrieval
system or transmitted in any form or by any means without the prior written permission of IMD.

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NVIDIA: Background
NVIDIA, pronounced “Invidia” from the Latin word for “envy,” was a Californian graphics
card company. It was founded in 1993 with just $40,000 in capital by 30-year-old former AMD
chip designer Jen-Hsun Huang (who would become CEO), Sun engineer Chris Malachowsky,
and Sun graphics chip designer Curtis Priem. The three saw an opportunity in the burgeoning
3D computer-game market.

The first two years were tough. NVIDIA struggled with an over-ambitious first product, its
own programming standard and a lack of market demand for its premium products. At the end
of 1995, all but 35 employees were laid off. Ditching its own standard, the company switched
to Microsoft’s new DirectX software standard. It invested 33% ($1 million) of its remaining
cash on graphics card emulation i – a technology that allowed NVIDIA’s engineers to test their
designs in a virtual environment before incurring any production costs. This decision, which
enabled rapid design and development iterations, meant NVIDIA was able to release a new
graphics chip every six to nine months – an unprecedented pace. In 1998, the company
announced a strategic partnership with Taiwan semiconductor manufacturer TSMC to
manufacture all of NVIDIA’s GPUs using a fabless approach. 1 (Refer to Exhibit 1 for a
timeline of events and key competitor moves.)

NVIDIA went public in 1999, raising $42 million, with shares closing 64% up on its first day
of trading. Later that year NVIDIA released the GeForce 256, billed as the world’s first GPU,
which offloaded all graphics processing from the CPU (central processing unit). It
outperformed its 3dfx rival by 50%. The built-in transform and lighting (T&L) module also
allowed NVIDIA to enter the computer-aided design (CAD) market for the first time, with its
new Quadro range.

Becoming a Leader
In 1999, Sony successfully launched its PlayStation 2 (PS2) in Japan, which the press predicted
would “destroy PC gaming.” ii Threatened, Microsoft decided it had to rapidly launch its own
games console, preferably before the US debut of the PS2 in 2000. Its trump card was DirectX,
a Windows technology that allowed 3D games to run without developers having to port their
games to every graphics card. Microsoft knew that Sony was dependent on third-party
publishers for content – publishers that could be lured away to another platform, with the right
incentives. Microsoft initially approached NVIDIA for the Xbox GPU, but NVIDIA’s quote
was too high. Huang said, “I wanted to do the deal, but not if it was going to kill the
company.” iii

Microsoft, instead, decided to acquire unknown graphics chip design house Gigapixel and
bring it in-house in the hope of manufacturing its own chips and saving on cost. Yet Microsoft
was new to the nuances of semiconductor economics, where the unit price was dependent on
size, yield, design complexity and manufacturing facilities. Ultimately, Gigapixel’s increasing
lead times pushed the Xbox launch deep into 2001. Facing a revolt from game developers
unhappy with an unknown new chip, Microsoft signed a last-minute deal with NVIDIA on the
eve of the Xbox announcement. To meet the Xbox launch deadline and ensure support for

1
Fabless manufacturing is the predominant business model in the semiconductor industry. It involves
the design and sale of semiconductor hardware and processors, while outsourcing the fabrication to
manufacturers with specialized semiconductor foundries. This model drastically lowers capital costs
and allows fabless companies to concentrate their investments on research and development.

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DirectX, NVIDIA’s proposal was to fuse two GeForce 256 cores together to create a custom
GPU for the Xbox. Microsoft paid NVIDIA $200 million up front and $48 per unit for the first
5 million GPUs. Later, in 2002, Microsoft would take NVIDIA to court, demanding a discount
on further supply. iv

A last-minute meeting between Intel’s Paul Otellini and Bill Gates on the night of the NVIDIA
deal, meant Microsoft also made a switch from AMD to Intel CPUs for the Xbox. Both
Gigapixel and AMD employees were left stunned by the news. Gigapixel was snapped up by
NVIDIA’s once dominant 1990s rival, but now struggling, 3dfx. v Soon after that, NVIDIA
acquired 3dfx and all of Gigapixel’s assets. This left NVIDIA with only one real competitor –
ATI Technologies.

Rivalry with ATI

ATI was founded in Toronto in 1985 and went public in 1993. Its answer to NVIDIA’s
GeForce was the ATI Radeon line of graphics cards. The two companies went on to dominate
the graphics card market in a closely fought battle between 2000 and 2006. It was ATI that
won the contract to design the Xbox 360’s Xenon GPU. vi Microsoft demanded full control of
production and manufacturing to avoid a repeat of the perceived high price of the original
Xbox NVIDIA GPUs. When the console launched in 2005, however, it was plagued by
hardware defects and an abnormally high failure rate, which was remembered years later as
the infamous “Red Rings of Death.” vii

Meanwhile, in 2004, NVIDIA had quietly signed a deal to provide Sony with a GeForce-based
GPU design named RSX for its new PlayStation 3 console. It was a coup for NVIDIA, and a
first for Sony, which usually designed and manufactured its own hardware – a sign of the
rapidly increasing complexity of producing a competitive GPU. The RSX GPU silicon was
produced at Sony Group’s own Nagasaki Fab2 foundry.

In July 2006, Advanced Micro Devices (AMD) announced it was buying ATI Technologies
for $5.4 billion in cash and stock, sending shockwaves through the industry. AMD believed
that shrinking CPU sizes would leave room for fusing a CPU with a GPU and allow it to
outmaneuver Intel, which did not have any comparable capabilities.viii AMD’s first target was
NVIDIA, but NVIDIA’s CEO Huang, a former AMD employee, insisted he become CEO of
the joint company, so AMD turned to ATI. ix The merger between AMD and ATI was complex,
not least because AMD was involved in an antitrust suit against Intel and weighed down by
the cost of running its own foundries. x

CUDA Cores: The Game Changer

While AMD/ATI were distracted by their integration, NVIDIA launched the GeForce G80,
featuring its new “Tesla” microarchitecture. This was considered a gamechanger in the
industry. The G80 offered a 100% performance improvement over the previous generation,
redefining what GPUs were capable of. NVIDIA realized that if it switched its GPU
architecture from arrays of “specialized” cores, dedicated to specific tasks, to an array of much
“simpler” cores, it could include many more cores and run them at double the clock-speed.
Crucially, they could be programmed to perform whatever calculations were required at any
particular moment. The G80’s revolutionary “compute” approach carried a big risk: NVIDIA
was adding extra features that were unrelated to gaming, at substantial extra cost, to a product
that was primarily aimed at the gaming market.

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We definitely felt that compute was a risk. Both in terms of area – we were adding area that all
of our gaming products would have to carry even though it wouldn’t be used for gaming – and
in terms of complexity of taking on compute as a parallel operating model for the chip. xi

Johan Alben, Senior VP, GPU Engineering

To ensure all developers could take full advantage of the revolutionary G80 architecture to
accelerate their programs, now that any task could be parallelized, NVIDIA launched a new
programming model named the Compute Unified Device Architecture (CUDA). At the heart
of CUDA’s design was NVIDIA’s belief that the world needed a new parallel programming
model. CUDA provided an abstraction that allowed developers to ignore the underlying
hardware completely, which made developing on it quicker and cheaper. It turned out that
programs written using CUDA, and accelerated using a G80, were not just a little faster – they
were 100–400 times faster (refer toe Table 1). This heralded the era of general-purpose GPU
(GPGPU) programming.

No Greeks Greeks
Intel Xeon 18.1s - 26.9s -
ClearSpeed Advance 2 CSX600 2.9s 6x 6.4s 4x
NVIDIA 8800 GTX 0.045s 400x 0.18s 149s
Table 1: Example of CUDA performance gains (Source: NVIDIA Corporation, 2006–2008)

CUDA had applications across multiple fields, including medicine, chemistry, biology, physics
and finance. NVIDIA was able to ensure widespread adoption of CUDA through its heavy
investment in a CUDA ecosystem, and its existing network of developer programs and university
partnerships. It also spurred the development of competing GPGPU standards like the ATI-
supported open-standard, OpenCL, which worked with multiple graphics card brands, unlike
CUDA. The GeForce 8 series was not without its problems. Laptop varieties of the G80 started
failing at extremely high rates, due potentially to a manufacturing defect. NVIDIA tried to cover
it up, but eventually admitted the problem and took a $200 million write-down. It then became
the subject of a class-action lawsuit by investors, claiming NVIDIA had lost $3 billion in market
capitalization due to the way it had handled the problem. xii

NVIDIA’s G80 “Tesla” microarchitecture started the GPGPU revolution. The next generation
“Fermi” microarchitecture cemented NVIDIA’s leading position.
It is completely clear that GPUs are now general-purpose parallel computing processors with
amazing graphics, and not just graphics chips anymore. xiii

Jen-Hsun Huang, CEO, NVIDIA

Unveiled in September 2009, Fermi had 512 CUDA cores compared to the G80’s 128 and
eight times the peak arithmetic performance.

Enter Artificial Intelligence

The GeForce 580 GTX, the top Fermi-based consumer graphics card, launched in 2010. It was
on a pair of these cards that University of Toronto PhD student Alex Krizhevsky started
training early versions of what would become AlexNet – a deep-learning algorithm
dramatically better than any algorithm created earlier. xiv Using the Fermi CGU, Krizhevsky
joined up with fellow student Ilya Sutskever and Professor Geoffrey Hinton to enter an AI

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image recognition competition – ImageNet – in 2012. Their submission blew the competition
away. With 85% accuracy, it was the first algorithm to breach the critical sub-25% error
threshold and was 41% better than the nearest competition. (Refer to Exhibit 2 for background
on machine learning, GPUs and AlexNet.) It was a defining moment in artificial intelligence,
and it put the spotlight and deep-learning AI leadership firmly on NVIDIA. AlexNet was later
bought by Google, which saw an opportunity to take AI to the next level of performance.

Strategic Steps … and Missteps

In 2006, NVIDIA had acquired Indian–US company PortalPlayer, a designer of SoC hardware
for personal media players, for $357 million. xv PortalPlayer had recently been dropped by
Apple’s iPod line, which had accounted for most of its revenue. Leveraging the PortalPlayer
acquisition, NVIDIA launched its brand new “Tegra” SoC product line for mobile devices.
Despite much lauded designs and great performance, it struggled in a competitive market and
had limited success. In 2011, NVIDIA launched the Tegra 3 quad-core SoC. It was only when
Audi and Tesla Motors both announced plans to use the Tegra 3 processor to power their
vehicles’ infotainment systems across their entire ranges worldwide that it became a strategic
product for NVIDIA. Tegra gave NVIDIA entry into the automotive industry. Four years later
the company would further develop this market with the launch of its Tegra-based Drive PX
automotive platform.

Not every strategic move resulted in success. Attempting to compete with mobile giant
Qualcomm, NVIDIA acquired Icera for $376 million in 2011. xvi It planned to incorporate an
LTE modem into its next-gen Tegra 4 SoC. Four years later, with only a negligible presence
in the market, NVIDIA announced plans to sell Icera and exit the mobile processor market
completely. xvii

Our vision was right, but the mobile business is not for us. NVIDIA is not in the commodity chip
business that the smartphone market has become … our mobile experience was far from a bust.
The future of computing is constrained by energy. The technology, methodologies, and design
culture of energy efficiency have allowed us to build the world’s most efficient GPU
architecture. xviii

Jen-Hsun Huang, CEO, NVIDIA

NVIDIA’s Tegra SoC put it squarely in the running for the next generation of gaming consoles.
Microsoft and Sony both wanted to increase the market share of their new consoles, the Xbox
One and PlayStation 4. The key to achieving this would be to increase the number of
applications that could run on their consoles and lower the development costs of third-party
publishers. There were two options for Microsoft and Sony: ARM or x86, xix the only two CPU
architectures that had the performance and developer support to achieve their goals. They also
both wanted an SoC solution, as it used less power and space and generated less heat.

ARM could not compete on pure performance and lacked a viable 64-bit option, important for
memory-hungry games. That eliminated the ARM-based NVIDIA Tegra. Intel’s potential
solutions lacked the required graphics power to run games. In 2013, at “E3,” the world’s
biggest computer game show, Microsoft and Sony announced their new consoles would both
be using an SoC from AMD that would be custom-designed for each console. NVIDIA
claimed it had chosen not to compete as the financial rewards were insufficient.xx

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The Rise of Deep Learning

Despite exiting the mobile phone business and losing out on both new gaming consoles,
NVIDIA had an ace up its sleeve – its new Pascal microarchitecture. First announced by Huang
at its GPU Technology conference in 2015, Pascal took three years to develop and was heavy
on features designed to increase deep learning performance. The first Pascal-based product
announcement xxi in 2016 was not a gaming card, but the Tesla P100, designed for high-
performance computing. It cost just under $10,000, had 3,584 CUDA cores, and promised a
massive increase in neural-network training performance compared to the previous generation.
Included in the announcement was CUDA version 8 and new software called nvGRAPH that
was aimed at accelerating big-data analytics. Huang announced to investors in 2017:

AI fueled the rapid growth of our datacenter business, which tripled year over year in the fourth
quarter, bringing total annual revenue to $830 million. We have a multi-year lead in AI
computing [and we’ve] built an end-to-end platform that starts with a GPU optimized for AI.
Our single architecture spans computers of every shape and size – PCs, servers, IoT devices –
and is available from every cloud service provider – Alibaba, Amazon, Google, IBM, Microsoft.
GPU deep learning is the most advanced, most accessible platform for AI. xxii

Jen-Hsun Huang, CEO, NVIDIA

At the same time, in a world-first for both NVIDIA and the industry, the company launched
the NVIDIA DGX-1, billed as an “AI super-computer in a box.” xxiii The off-the-shelf solution
contained eight Tesla P100 cards in a standard medium-sized rack server enclosure costing
$129,000. (Refer to Figure 1 for performance comparisons based on the workload of ResNet-
50, 90 epochs to solution, CPU server: Dual Xeon E5-2699v4, 2.6 GHz.) Google’s Raja
Monga also attended the press conference, talking about the DGX-1’s use of TensorFlow,
Google’s open-source machine learning framework.

Figure 1: DGX-1 performance comparisons (Source: reproduced from NVIDIA calculations)

The first DGX-1 produced was donated to Elon Musk’s non-profit AI research company,
OpenAI. NVIDIA also gave nine others to prominent universities known for their deep-
learning research departments, including: New York University, Stanford and the University
of Toronto.
Some companies, such as London-based BenevolentAI, considered the DGX-1’s premium
price to be worth the money when compared to a year’s worth of the equivalent Amazon Web

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Services computer resource. xxiv Others, such as Baidu AI Labs’ Greg Diamos, thought it likely
that large customers would want to build their own custom servers. xxv Both Microsoft and
Facebook went on to create the HGX-1 and Big Basin respectively, with each server featuring
eight Tesla P100 cards like the DGX-1. xxvi Meanwhile IBM created its IS822LC server, which
used only four Tesla P100 cards mixed with Power CPUs, and an open-reference design that
anyone could copy. xxvii Google on the other hand, announced its own data-center hardware to
accelerate machine-learning, called the Tensor Processing Unit (TPU), although it was not
commercially available.xxviii

NVIDIA in 2018
In 1998, NVIDIA had 117 employees, and by January 2018, that number had grown to more
than 8,000. The company had expanded beyond its original market of 3D graphics cards to
four markets: gaming, professional visualization, datacenter and automotive. Despite the four
different markets, the company employed a single-microarchitecture across all its products
(Pascal and Volta). The strategy was to focus on markets where its architecture gave it a
competitive edge, which meant a strong return on research and development (R&D). NVIDIA
spent its entire R&D budget on researching new micro-architectures across a three-year
horizon, then producing a new range of GPU products based on that architecture. NVIDIA’s
GPU design realized strong year-over-year growth of 39% in FY2017, representing 84.3% of
total revenues. (Refer to Exhibit 3 for key financials and share price.)
Gaming was the company’s main revenue earner, but it was also riding on the wave of
cryptocurrency miners. JPR research xxix estimated that 3 million GPU’s were bought by miners
in 2017. NVIDIA’s GeForce NOW application provided cloud gaming services. The global
cloud computing market was expected to reach $411 billion by 2020. xxx In early 2018,
NVIDIA tried to enforce a GeForce Partner Program, obliging PC and add-in board vendors
to use only NVIDIA’s GPUs in their high-end gaming brands, claiming it was an unfair use of
their marketing support for vendors to use other GPUs. The company was targeted for being
anti-competitive shortly afterwards.
Professional visualization (virtualization, mobility, virtual reality and AI) was another market
that NVIDIA was successfully advancing, working with customers by providing a
visualization platform powered by advanced GPUs. Customers were using the platform to
power a variety of medical advances. Arterys, for example, was using NVIDIA GPU-powered
deep learning to speed up analysis of medical images, which were deployed in GE Healthcare
MRI machines to help diagnose heart disease. In 2017, Japan’s Komatsu selected NVIDIA to
provide GPUs to its construction sites to transform them into jobsites of the future that would
be safer and more efficient.

For automotive, NVIDIA had launched its Drive PX1 successor, the PX2, some months prior
to the launch of the Tesla P100 filled DGX-1. It was aimed at autonomous driving and featured
two Tegra-based SoCs and a Pascal-based GPU. NVIDIA’s early automotive partner, Tesla
Motors, having split from long-time partner Mobileye, announced that all future vehicles would
include a Drive PX2xxxi to enable “enhanced autopilot.” Taking a platform approach, NVIDIA
also partnered with Volvo, Audi, Daimler, BMW and Ford to test the PX2. It supplied Toyota,
Volkswagen, Volvo, BMW, Daimler, Honda, Renault-Nissan, Bosch, Baidu and others.

Despite NVIDIA’s success, Tesla announced in a quarterly earnings call in August 2018 that
it would build its own custom chips for its self-driving hardware. One analyst suggested that
Tesla thought that chip vendors were “slowing them down” or “locking them into a particular
architecture,” and it needed to own the technology. xxxii NVIDIA responded that it had already
identified the issue and had successfully improved it, achieving 30 trillion operations per

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second (TOPS) with just 30 Watts. Tesla’s custom version of the PX2 produced between 8–
10 TOPS. Further, in 2019, NVIDIA planned to launch the Drive Pegasus, which would
achieve 320 TOPS at 500 Watts. xxxiii

Also threatening NVIDIA’s dominance was rival Intel. Intel bought Israeli automotive
company Mobileye in 2018. Mobileye’s EyeQ3 chip powered Tesla’s first generation of
autopilot hardware, enabling Intel to enter the automotive market. Mobileye’s latest chip,
EyeQ5 was its third generation, and it had signed a deal for it to be deployed in eight million
vehicles in 2019. xxxiv Intel’s approach differed from NVIDIA, preferring to co-develop
processors optimized for integrated software applications, allowing the needs of the software
algorithm to determine what goes into the hardware for a more efficient implementation.xxxv
For data centers, NVIDIA worked with Alibaba Cloud, Baidu and Tencent to upgrade from
Pascal to Volta-based platforms, giving them increased processing speed and scalability for
AI inferencing and training. Amazon Web Services and Microsoft used NVIDIA GPUs for
their deep learning applications. While Google continued to use NVIDIA GPUs in its cloud,
despite announcing it would create its own hardware Cloud TPU.

In March 2019, NVIDIA won a bidding war against Intel and Microsoft for Israeli chipmaker,
Mellanox, for $6.9 billion. xxxvi Mellanox produced chips for very high-speed networks, critical
for expanding cloud services. Together, NVIDIA and Mellanox would power over 50% of the
world’s 500 biggest computers and cover every computer producer and major cloud service
provider. In the press release, Huang explained:

The emergence of AI and data science, as well as billions of simultaneous computer users, is
fueling skyrocketing demand on the world’s datacenters. Addressing this demand will require
holistic architectures that connect vast numbers of fast computing nodes over intelligent
networking fabrics to form a giant datacenter-scale computer engine. We’re excited to unite
NVIDIA’s accelerated computing platform with Mellanox’s world-renowned accelerated
networking platform under one roof to create next-generation datacenter-scale computing
solutions [and] I am particularly thrilled to work closely with the visionary leaders of Mellanox
and their amazing people to invent the computers of tomorrow. xxxvii

Jen-Hsun Huang, CEO, NVIDIA

Leading the Future of AI?

In 2018, NVIDIA was dominant and growing rapidly in the deep learning/AI space. Yet, there
were competitive threats on the horizon that could challenge NVIDIA’s position. These came
from Google’s Tensor flow processing unit (TPU) and companies including Intel, AMD and
Silicon Valley start-ups, such as Wave computing, that claimed to be working on chips that
were 10 times faster than NVIDIA’s with less power consumption. xxxviii China’s Cambricon,
backed by the Chinese government, while not targeting deep-learning training, could change
strategy and was a potential threat.

One commentator suggested that he viewed NVIDIA not as a GPU company but as a “platform
company with an insatiable appetite for growth.” xxxix and an ability to pivot quickly when
threatened. The question facing the company was: Did NVIDIA have a clear strategy and
roadmap to grow as an AI platform company? Was that the right strategy or should it continue
to explore and exploit other core markets? What did NVIDIA need to do tactically to retain its
leadership?

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Exhibit 1
NVIDIA’s Full Timeline of Significant Events 1993-2018

There are three key periods in NVIDIA’s timeline:

2006: AMD/ATI merger

2012: AlexNet revelation

2016: Pascal architecture launch

x April 1993: NVIDIA founded with $40,000 capital by 30-year old former AMD chip
designer and current CEO Jen-Hsun Huang, Sun engineer Chris Malachowsky, and Sun
graphics chip designer Curtis Priem.

x Late 1994: NVIDIA reaches agreement on its first strategic partnership with wafer
fabricator SGS-Thomson Microelectronics, with plants in France and Italy, to
manufacture its products.

x Late 1995: NVIDIA struggles with over-ambitious first product and own standard, not
enough 3D software to take advantage of its hardware and lays off all but 35 employees.
NVIDIA decides to abandon its own standard, embrace DirectX, and invest $1 million
(33% of NVIDIA’s cash) on GPU design emulation, allowing it to release a new card
every 6 months. (Forbes, 2007, https://www.forbes.com/forbes/2008/0107/092.html).

x February 1998: NVIDIA announces strategic partnership with Taiwan semiconductor

manufacturer TSMC, for all future NVIDIA products. (NVIDIA, 1998,
http://www.nvidia.com/object/IO_20020114_4583.html).

x January 1999: NVIDIA IPO, $42m raised from 3.5m shares at $12 each. First day
trading closes 64% up at $19.69, a market value of $626.1m. (Wall Street Journal, 1999,
https://www.wsj.com/articles/SB917224371262043000)

x August 1999: NVIDIA launches the industry’s first “GPU,” the GeForce 256, with 4-
pixel pipelines that outperformed rivals by a wide margin and was the first graphics chip
that offloaded all graphics processing from the CPU.

x March 2000: based on GeForce 256’s success, Microsoft announces Xbox console will
use NVIDIA chip (NV20), later released as the GeForce 3, the industry’s first
programmable GPU.

x December 2000: NVIDIA acquires one-time rival and late 1990s market leader 3dfx.
Acquisition finalized in April 2002.

x April 2002: Microsoft and NVIDIA enter arbitration over pricing of NVIDIA’s chips
for Xbox, with Microsoft demanding a discount, which was later settled privately in
February 2003.

x September 2002: NVIDIA named “Fastest Growing Company of the Year” by Fortune
Magazine.

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Exhibit 1 (continued)

x May 2005: Microsoft unveils the Xbox 360, which instead uses a graphics chip by
NVIDIA’s arch-rival ATI Technologies.

x July 2006: In a bid to compete with Intel and enter new markets, AMD announces plans
to acquire NVIDIA rival ATI Technologies for $5.4 billion after months of speculation
(New York Times, 2006, https://www.nytimes.com/2006/07/24/technology/24cnd-
semi.html). In 2012, a story emerged that AMD had initially targeted NVIDIA, but the
deal had fallen through as Huang had insisted he become CEO of the combined
company (Forbes, 2012, https://www.forbes.com/sites/briancaulfield/2012/02/22/amd-
talked-with-nvidia-about-acquisition-before-grabbing-ati/). AMD’s poor execution of
the ATI acquisition allowed NVIDIA to launch a string of superior products and take
the lead.

x November 2006: NVIDIA unveils CUDA (compute unified device architecture),

allowing programmers to take advantage of parallel computing power of NVIDIA cards.
This coincided with the launch of its GTX 8800 card, which crushed all previous
competition in gaming benchmarks, and was the first consumer card to swap dedicated
pixel shaders for simpler more general-purpose programmable stream processors (now
called CUDA cores), which kickstarted GPGPU programming. (ExtremeTech, 2016,
https://www.extremetech.com/gaming/239078-ten-years-ago-today-nvidia-launched-
g80-powered-geforce-8800-changed-pc-gaming-computing-forever)

x December 2007: Forbes award “Company of the Year” to NVIDIA (Forbes, 2007,
https://www.forbes.com/2007/12/20/best-big-companies-biz-
cz_08platinum_bz_1220intro.html)

x February 2008: NVIDIA acquired Ageia, developer of PhysX (originally developed by

ETH Zurich spinoff, NovodeX), a physics engine and processing unit, which brought
realistic in-game physics to games and simulations. NVIDIA integrated PhysX into its
graphics cards.

x July 2008: NVIDIA takes a $200 million write-down due to manufacturing defects on
certain products. Class-action lawsuit started in 2008 was later settled in 2010.

x September 2009: NVIDIA unveils next-gen CUDA architecture “Fermi,” heralded as

the first complete GPU computing architecture. (NVIDIA Fermi,
http://www.nvidia.co.uk/object/fermi_architecture_uk.html)

x February 2011: NVIDIA announces Tegra 3, the first quad-core SoC, later used by
Audi in 2012–13 in all its vehicles. Tesla’s Model S contained two Tegra 3D modules.
19.

x September 2012: AlexNet, a deep convolutional neural network by Hinton, Sutskever,

and Krizhevsky from the University of Toronto, wins the ImageNet competition,
performing an unprecedented 41% better than rivals. Written using CUDA and trained
on two NVIDIA GTX 580 GPU’s, it created, almost overnight, the field of GPU-
accelerated deep learning (QZ, 2017, ZD Net 2018, 9 Deep Learning Papers,
https://adeshpande3.github.io/The-9-Deep-Learning-Papers-You-Need-To-Know-
About.html).

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Exhibit 1 (continued)

x Jun 2013: Despite NVIDIA’s recent Tegra 4 ARM SoC and power-efficient Maxwell
GPU architecture, at the E3 gaming conference, both Microsoft and Sony confirm they
will use AMD/ATI x86 SoC for their Xbox One and PlayStation 4 consoles (Forbes,
2013, https://www.forbes.com/sites/patrickmoorhead/2013/06/26/the-real-reasons-
microsoft-and-sony-chose-amd-for-consoles/#2cbc814d2185).

x Early 2016: In its 2016 annual report, NVIDIA informs shareholders of its decision to
exit the smartphone business, which has become a “commodity chip business.”

x January 2016: At CES 2016, NVIDIA launches Drive PX2, based on Pascal, an in-car
computer, with accompanying DriveWorks software and DriveNet, a deep neural
network. Partners already lined up include Audi, BMW, Ford, Mercedes, and Volvo.
(NVIDIA, 2016, https://blogs.nvidia.com/blog/2016/01/04/automotive-nvidia-drive-
px-2/)

x April 2016: NVIDIA unveils the Tesla P100 the first GPU based on the new Pascal
architecture, a card aimed at deep learning systems. It also launched the DXG-1, a
server/workstation heralded as the “world’s first deep learning supercomputer”, with
the equivalent power of 250 traditional servers (NVIDIA, 2016,
http://www.nvidia.co.uk/object/nvidia-dgx-1-20160405-uk.html). Huang says the
company went “all in” on the new Pascal architecture, which cost $3 billion over three
years of R&D (NextPlatform, 2016, https://www.nextplatform.com/2016/04/05/nvidia-
puts-accelerator-metal-pascal/)

x May 2016: NVIDIA unveils GeForce 10 GPU series based on Pascal architecture, with
the GeForce 1080 performing significantly better than AMD’s Radeon 480X.

x May 2016: Google I/O, Tensor Processing Unit (TPU) announced, specifically designed
for its TensorFlow framework, and at the time already in-use in their datacenters. Not
available for sale.

x July 2016: Tesla and Mobileye, used for AutoPilot v1, end their partnership after fatal
crash (ArsTechnica, 2016, https://arstechnica.com/cars/2016/07/tesla-and-mobileye-
call-it-quits-will-the-car-company-build-its-own-sensors/), and switch to NVIDIA
Drive PX2 (NVIDIA 2016, https://blogs.nvidia.com/blog/2016/10/20/tesla-motors-
self-driving/).

x September 2016: NVIDIA unveils an updated Drive PX2 for cars, palm-sized and
consuming 10 watts, but enough power for self-driving vehicles. NVIDIA reveals Baidu
will use the new Drive PX2 for the AI engine of its self-driving car. (Hexus, 2016,
https://blogs.nvidia.com/blog/2016/01/04/automotive-nvidia-drive-px-2/)

x March 2017: Intel acquires Mobileye for $15.3 billion (TechCrunch, 2017,
https://techcrunch.com/2017/03/13/reports-intel-buying-mobileye-for-up-to-16b-to-
expand-in-self-driving-tech/)

x May 2017: Google I/O, Tensor Processing Unit 2 announced, available for Google
Cloud Compute TensorFlow applications (Forbes, 2017,
https://www.forbes.com/sites/aarontilley/2017/05/25/two-big-reasons-why-googles-ai-
chips-will-have-a-tough-time-competing-with-nvidia/#53b4d7b46878).

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Exhibit 1 (continued)

x September 2017: Tesla snub NVIDIA by announcing it will develop its own custom
silicon for self-driving cars, in partnership with AMD, hinting at regulatory
requirements (ArsTechnica, 2017, https://arstechnica.com/cars/2017/09/report-tesla-
snubbing-nvidia-developing-its-own-self-driving-chip/; MarketWatch, 2017,
https://www.marketwatch.com/story/elon-musk-hints-at-tesla-self-driving-hardware-
change-nvidia-stock-drops-2017-11-01). Intel reveals it has been working with
Google’s Waymo on self-driving cars since 2009 (ArsTechnica, 2017,
https://arstechnica.com/cars/2017/09/waymos-autonomous-vehicles-are-powered-by-
intel/).

x October 2017: NVIDIA open-source NVDLA – the NVIDIA Deep Learning

Accelerator, a free and open architecture that promotes a standard way to design deep
learning accelerators (Phoronix, 2017,
https://www.phoronix.com/scan.php?page=news_item&px=NVIDIA-Open-Source-
NVDLA; Medium, Scott Amyx, 2017, https://medium.com/@ScottAmyx/nvidias-
radical-move-to-release-ai-chips-design-to-open-source-87f4857b4fb9).

x April 2018: Intel hires its first discrete GPU employee, popularizes a strong strategic
move by Intel into the discrete GPU space (Forbes, 2018,
https://www.forbes.com/sites/jasonevangelho/2018/04/29/intel-hires-its-first-discrete-
graphics-marketing-employee-chris-hook/2/#f8adbc92d7bc).

Source: Compiled by authors, various sources cited, NVIDIA.com

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Exhibit 2
Machine Learning, GPUs and AlexNet

Machine learning is a subset of algorithms in which a computer system progressively “learns”

how to improve its performance in a specific task, by using data rather than being explicitly
programmed. The core objective is learning to generalize from experience. The term “machine
learning” was originally coined by Arthur Samuel at IBM in 1959 and evolved from the study
of pattern recognition and computational learning theory. In simpler systems, machine learning
is usually used to calculate a prediction or probability based on observed data, by splitting off
some of the data to use as “training data” for a “classifier” or “model.” This is a form of
“supervised” learning, where example inputs are labelled and given to the model so that it
learns the general rule of how to map inputs to outputs. A common example is email spam-
filtering. In “unsupervised” learning, the system is left to find its own structure in the input
data. The goal is either to find hidden patterns in the data or give the system the rules and a
desired goal to reach.

“Artificial neural networks” (NN) are learning algorithms originally inspired by how animal
brains learn and structured as computations involving interconnected groups of artificial
neurons. Examples of such systems are computer vision, playing board games, and medical
diagnosis. “Deep Learning” systems are Artificial Neural-networks comprised of multiple
layers of neurons. These computationally intensive systems have been made feasible in recent
years by falling prices and hardware innovations such as GPGPU programming.

The term GPU (graphics processing unit) has been used since the 1980s, but it was popularized
by NVIDIA in 1999, when it marketed the GeForce 256 as the “world’s first GPU.” GPUs
became necessary with the rise in popularity of 3D computer graphics and games in the 1990s.
NVIDIA’s rival ATI referred to its Radeon 9700 as a VPU or “visual processing unit” when it
launched in 2002, but the term never stuck.

The difference between a typical CPU (central processing unit) from Intel and a GPU:

x A GPU has 1,000–3,000 slow (<1Ghz) simple cores for vector/matrix calculations

x Whereas a CPU has 2–16 fast (>2Ghz) large and complex general-purpose cores.

The reason behind this fundamental difference is a GPU is designed to render pixels on a
screen, which is one of many “embarrassingly parallel” problems – tasks where little or no
effort is needed to break it down into multiple smaller tasks of the same type which can be
performed in parallel. Whereas a CPU is used to run the operating system (OS) and all
applications, meaning it must be able to run many complex tasks independently at any one
time.

While reading research papers for his master’s thesis in 2009 at the University of Toronto,
Alex Krizhevsky had come across the use of graphics processing units (GPUs) to train neural-
networks, rather than traditional central processing units (CPUs). He thought this novel
approach might hold the key to unlocking the power of neural-networks with more layers,
otherwise known as “deep” neural-networks – previously considered unfeasible due to the vast
amount of processing power required. His efforts resulted in a design that soon outperformed
even the best benchmarks of the time for speed and accuracy but remained relatively
unappreciated. Krizhevsky decided to apply for a PhD with Professor Geoffrey Hinton, an
early artificial neural-network pioneer, at the University of Toronto.

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Exhibit 2 (continued)

In 2011, Krizhevsky’s fellow PhD student, Ilya Sutskever, discovered the ImageNet
competition2. Professor Hinton and his team realized that Krizhevsky’s deep neutral-network
approach was capable of solving the challenge. Using a pair of NVIDIA GeForce 580 series
graphics cards, the network could be trained in days rather than months. In all, it took the team
six months to match the accuracy of the previous year’s submissions, and another six months
to reach the level of accuracy it wanted to submit to the competition. Their submission in 2012
was called AlexNet. It blew the competition away. At 85% accuracy it was the only algorithm
to breach the sub-25% error threshold and was 41% better than the nearest competitor.
Crucially, it proved that deep-learning techniques were superior to others in solving the most
complex problems. Other research teams were left scrambling to replicate AlexNet’s results.

Source: The inside story of how AI got good enough to dominate Silicon Valley, QUARTZ xl

2
The ImageNet project is a large set of over 10 million categorized and labelled images, specifically
designed for computer-vision research. It was built by a Princeton research team, which launched the
open competition in 2010. It would be an annual contest open to anyone, where a research team’s
algorithms could compete for accuracy across several visual recognition tasks. In the competition’s first
year, results varied considerably with every team getting more than 25% wrong.

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Exhibit 3
NVIDIA Share Price 1999–2018 & Financial Statement 2010–2018

Source: US Equity data, Bloomberg.com

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Exhibit 3 (continued)
- 16 -

Source: Thompson One Database

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Endnotes
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Nvidia Annual Report 2016

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xix
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xxxvi
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Aug 2024 to Feb 2025.