Nvidia: The Story Behind the Most Watched Company on Earth

Hindsight is perfect. It's easy now to look back and think that artificial intelligence chip pioneer Nvidia (NASDAQ: NVDA) was always destined for greatness, given that it now has the largest market capitalization of any company worldwide. Many analysts believe that Nvidia can do no wrong, and that its colossal past success warrants an unwavering belief that a prosperous future for Nvidia stock is assured.

But to understand where Nvidia is now, it's valuable to look back to where it got its start and the path it took to get here. That's a core philosophy of my new Voyager Portfolio, which has been looking at a variety of different companies to assess their history, the current state of their businesses, and their prospects for the future. In this three-part series, you'll get a more complete picture of Nvidia's past, learning how it gradually evolved from being a niche player in a relatively small part of the technology sector to expand into the colossus it is today.

Image source: Getty Images.

Painting a prettier picture

Nvidia got its start in 1993, when current CEO Jensen Huang joined forces with a pair of fellow co-founders to create the company. At the time, artificial intelligence was the province of science fiction, and Huang's ambitions were of much more limited scope. Nvidia spent most of the time during the tech boom of the 1990s trying to create technology that would push the video gaming and multimedia industries beyond their two-dimensional roots and allow for realistic 3D graphics rendering.

It took six years, but by 1999, Nvidia had achieved a key milestone in its early aspirations. The company's launch of its GeForce 256 graphics processing unit (GPU) marked the first time video game graphics had evolved beyond conventional graphics card technology. Instead of putting further strain on a computer's or game console's central processing unit (CPU), Nvidia's GPU took full responsibility for graphics. This helped keep games from slowing down or crashing. And in the years that followed, Nvidia GPUs inspired game creators to take new strides forward, with ever more realistic concepts that make the video games of the 1980s and 1990s look prehistoric by comparison.

Going beyond the game

Despite their name, GPUs proved to have uses that weren't limited to graphics. CPUs were generally designed for executing defined tasks in sequence. But as software engineers turned their attention toward using the voluminous data they had collected to unlock valuable insights, efforts to use computers for deep learning led to the realization that the parallel processing power of GPUs made them much better suited than CPUs for handling heavy workloads.

The 2010s brought rapid advances in machine learning. Researchers frequently used Nvidia GPUs in their work, and in 2016, the donation of the first Nvidia DGX-1 AI supercomputer to OpenAI marked the beginning of a six-year journey that would eventually result in the 2022 launch of AI-powered chatbot ChatGPT.

Nvidia didn't abandon all of its past achievements and concentrate solely on AI hardware. Its RTX GPU in 2018 marked another transformation in computer graphics, allowing for real-time ray tracing for better resolution. And as Meta Platforms (NASDAQ: META) pushed the tech industry to adopt its vision of the metaverse, Nvidia's Omniverse platform emerged to enable digital twins and robotics that could span the physical and digital worlds.

All in due time

Nvidia's journey has been a long one, and it wasn't always headed in the direction of AI. A key part of Nvidia's success has been recognizing when the initial addressable market it had sought out to capture was far smaller than the full capabilities of its technology. As you'll see tomorrow in the second article of this three-part series, Nvidia's financial story follows a similar course.

Dan Caplinger has positions in Meta Platforms and Nvidia. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.