This analysis was first published in SvD Näringsliv, in Swedish, on June 8th, 2023. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.
The flamboyant visionary Jensen Huang likes to dress in black leather jackets. He is a rock star in the chip and semiconductor industry. Now Nvidia’s founder faces his greatest challenge — living up to the market’s expectations.
The black leather jacket is on. The grey hair is well-groomed. Jensen Huang steps onto the stage at the Computex trade show in Taiwan with a wide smile. The music playing in the background sounds like it belongs in a Star Wars film.
“We’re back! I haven’t given an in-person presentation in four years. Wish me luck!”
Jensen Huang likes to joke with the audience. During the pandemic, he filmed his company presentations at home in his kitchen and pulled new chips out of the oven. Even if it had been a while since he was on stage, it looks like home turf for him.
He has every reason to feel comfortable.
Huang’s chip company, Nvidia, is the central player behind the scenes of the current AI explosion. The company manufactures the hardware used to train AI models. And given the interest in AI, demand for Nvidia’s products seems almost limitless.
By the time Huang takes the stage, Nvidia has just crossed the coveted threshold of a market cap above one trillion dollars — that is, a thousand billion dollars.
Jensen Huang’s start in life was considerably more modest than that.
For a start, his name is not Jensen, but Jen-Hsun. He adopted the slightly Danish-sounding nickname to adapt to the United States, where he moved at the age of nine. His parents felt that their home country of Taiwan and their temporary home country of Thailand were politically turbulent. They decided to send Huang and his older brother across the Pacific to give them a different kind of life.
The Huang brothers ended up at a boarding school in the small town of Oneida in eastern Kentucky. The school belonged to the Baptist movement, and all students had dedicated duties beyond their schoolwork. Huang’s job was to scrub the toilets — every day. In an interview with American radio station NPR, Huang recounts that it was a tough school, where some children carried knives and fights often resulted in someone getting hurt.
“In the end, I loved my time there. We worked very hard, we studied very hard, and the other students were very tough,” Huang told NPR.
He describes taking away a work ethic and experiences he could build on.
Huang went on to university to study electrical engineering. He earned a master’s degree from the prestigious Stanford, and then worked in the surrounding Silicon Valley.
At 30, he did what so many around him were doing — started a tech company. At a run-down restaurant, he founded Nvidia in 1993, alongside two friends.
The insight behind the company was that the future would require better computer graphics, but that the hardware to enable this was not yet available. The thesis proved correct, and Nvidia found success by beginning to manufacture graphics cards for PC computers.
The focus on graphics made them popular among gaming enthusiasts. In a 2002 interview in Wired magazine, a game developer described how Nvidia’s graphics cards played a large part in the success of Microsoft’s Xbox gaming console.
Gaming components are a large market in themselves. But the idea of using them for entirely different purposes was the real breakthrough.
Nvidia expanded its portfolio to what are called GPUs — graphics processing units — a type of chip capable of handling multiple calculations in parallel. In 2007, the company developed software that allowed these GPU chips to be used in far more areas than just graphics. With this insight, the potential market had multiplied overnight.
Since then, Nvidia has been part of several major technology shifts, particularly those requiring significant processing power.
The chips are used, for instance, in the new supercomputers that produce advanced weather forecasts and conduct research in chemistry and physics. They can also facilitate the production of cryptocurrency, in the process known as “mining.” Being exposed to new technologies does come with risks, however. When the cryptocurrency market plunged sharply in 2018, Nvidia ran into trouble as demand for their products fell steeply — and quickly.
Now the AI hype has taken over where crypto left off. Suddenly the company’s products are being mentioned by companies like Alphabet, Google’s parent company, when they present their quarterly figures. More people than ever are interested in what components are under the hood of computers.
Huang therefore faces what may be the greatest challenge for him and the company: managing the world’s expectations.
Nvidia trades at a P/E ratio of around 200 and is priced at over 37 times revenue. Comparable figures for industry peer Qualcomm are around P/E 12 and 3 times revenue. Qualcomm does have a different strategy, primarily focusing on other types of components than Nvidia. It is an enormous success already priced into Nvidia’s stock — and a strong belief in continued demand for GPU chips.
The market has spoken — it believes in continued success for AI, and through that, for Nvidia. Huang is the visionary who was right in his initial prediction, and who managed to rebuild the company into something that now creates the infrastructure for the greatest technology shift of our time.
Having the right vision is not enough, however — you also have to be able to deliver on it. The market expects flawless execution. The pressure is now on Jensen Huang. Can he make Nvidia the next tech giant?
