Nvidia: The GPU Company (1993-2006)

He wears signature leather jackets. He can bench press more than you. He makes cars that drive themselves. He’s cheated death — both corporate and personal — too many times to count, and he runs the 8th most valuable company in the world. Nope, he’s not Elon Musk, he’s Jensen Huang — the most badass CEO in semiconductor history. Today we tell the first chapter of his and Nvidia’s incredible story. You’ll want to buckle up for this one! *Links:* - Shoot to Kill: https://www.forbes.com/global/2008/0107/070.html?sh=261e2068d077 - Episode sources: https://www.acquired.fm/episodes/nvidia-the-gpu-company-1993-2006#sources *Carve Outs:* - Starting Strength: https://startingstrength.com - Elden Ring: https://en.bandainamcoent.eu/elden-ring/elden-ring *More Acquired:* - Get email updates https://www.acquired.fm/email and vote on future episodes! - Join the Slack http://acquired.fm/slack - Check out the latest swag in the ACQ Merch Store https://www.acquired.fm/store! _Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions._

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:26Ben Gilbert?

  Welcome to Season 10, Episode 5 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

• 0:41David Rosenthal?

  And I'm David Rosenthal, and I am an angel investor based in San Francisco.

• 0:46Ben Gilbert?

  And we are your hosts. It is the eighth-largest company in the world by market cap.

• 0:53David Rosenthal?

  Dang.

• 0:54Ben Gilbert?

  When Nvidia began in 1993, it made computer graphics chips in a brutally competitive and low-margin market. There were 90 undifferentiated competitors, all doing basically the same thing at the same time, and yet today, they have an 83% market share of standalone GPUs, that's graphics processing units, for those of you starting with us from square one, that are supplied for desktop and laptop computers.

• 1:21David Rosenthal?

  Ben, you're telling the whole story here.

• 1:23Ben Gilbert?

  Sorry, sorry. I'll tease a few things here. So not only that, but of course, followers of Nvidia know that they recently pioneered a completely new market: the hardware and software development tools to power machine learning, neural networks, deep learning, all of this in the cloud and the data center, which obviously is proving to define this whole decade of computing. And as David and I began our research, we realized this really could be a book, and like a thriller of a book, since the co-founder and CEO Jensen Huang really has bet the company, like the whole company, three separate times, nearly going bankrupt each time. But obviously, as we reflect back here today, that certainly did not happen.

• 2:06David Rosenthal?

  All right, so here's everything you need to know about Jensen. The Cliffs Notes before we talk for like six hours about him: the dude used to drive a Toyota Supra, like a Fast and the Furious-style, like a death machine, and he almost died. He got in like a huge accident.

• 2:23Ben Gilbert?

  Just one more way he is like Elon Musk.

• 2:26David Rosenthal?

  Oh, man, crazy.

• 2:28Ben Gilbert?

  Well, because we have way too much here for one episode, we'll save the stories on machine learning for next time. Today, we are going to tell the wild story of Nvidia's founding to its rise in prominence powering the computer graphics and gaming revolution. This really is a story of like true invention and innovation. It reminds you that engineering breakthroughs really do push our world forward. And in saying that, just kind of set some context, this is a story that takes place from about 1993 to kind of the mid to late 2000s. And as hyped as Nvidia has been, you know, over the last five years, obviously with the stock run up and everyone's excitement around the company, I think Jensen is still an underrated CEO, even rated

• 3:13David Rosenthal?

  Hundred percent.

• 3:14Ben Gilbert?

  Where the Nvidia bulls have put him. I think Jensen is one of those people where like, if you know about him, you know what we're talking about and you have unbelievable reverence. But I think not enough people really know.

• 3:26David Rosenthal?

  Just one more Jensen quote before we get into the episode, this is the best. "My will to survive exceeds almost everybody else's will to kill me."

• 3:40David Rosenthal?

  Amazing.

• 3:41Ben Gilbert?

  All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 4:00David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote "shadow AI" running with no security review at all.

• 4:21Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's governance, risk and compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 4:43David Rosenthal?

  In half? Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 5:01Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you. Listeners, after you finish this episode, and you're thinking to yourself, gosh, I wish I could talk about this with people, we have good news for you. You can do that with 11,000 other smart members of the Acquired community at acquired.fm/slash/Slack. Here's a new

• 5:42Ben Gilbert?

  thing. If you haven't rated or reviewed this podcast yet, I think the last time we mentioned this was like years ago, Spotify in their mobile app just added the ability to rate. So if you listen in Spotify, you should totally leave us a little rating in there. If you're on Apple Podcasts, leave us a review. We really, really, really appreciate it when you help share your experience as a listener with others. All right, listeners, this is not financial advice. We may hold positions in things we discuss on this show. This is for entertainment and informational purposes only. And David, take us in.

• 6:19David Rosenthal?

  So, we start in February of 1963. What was going on in Silicon Valley in 1963? Let's see, Fairchild had already started, I think. And Silicon Valley was like underway, but it was early days. But we start, not in Silicon Valley, but in...

• 6:38Ben Gilbert?

  Taiwan?

• 6:39David Rosenthal?

  Yes, the southern part of the island of Taiwan, with the birth of Chen Sun Huang.

• 6:49David Rosenthal?

  Later Americanized to Jensen, Jensen Huang. So his dad was an engineer for the air conditioning company Carrier. Oh, yeah. Yeah, you see those like big like industrial air conditioning units on buildings and stuff. And when Jensen is four, his dad goes on a company training to America, to New York City. And he was like, wow, you know, this is amazing. I want my kids to grow up here and to have all the opportunities that are available. So he comes home, Jensen's four, Jensen has an older brother who's a couple of years older. You know, like, nobody speaks English.

• 7:30David Rosenthal?

  So his mom gets an English dictionary and picks 10 words every day, grills the two kids, like quizzes them and teaches them English out of the dictionary. Huh. Now, if you listen to Jensen, where does that accent come from? Because it's not what you would think. The family ends up moving to Thailand a few years later. And then when they're living in Thailand and Jensen is nine, they finally decide that this is the right time to send the kids to America. Now, the parents can't move to America yet. They don't have enough money, but they found a boarding school in America that is cheap enough that they can afford. It is called Oneida Baptist Institute, and it is in eastern Kentucky, the sticks of Kentucky.

• 8:14David Rosenthal?

  Jensen would later say that he and his brother were the first foreigners to attend this school, and they're pretty sure they were the first Chinese people ever in the town of Oneida. Whoa. Well, it turns out that the reason that this school, OBI, Oneida Baptist Institute, was so cheap was it's actually not a prep school. It's a reform school.

• 8:38David Rosenthal?

  So this is a school for like troubled kids. It's a reform school. So Jensen's roommate, when he shows up as a nine year old, is a 17 year old kid who had just gotten out of prison and was recovering from seven stab wounds that he got in a knife fight. Classic American journey right here. And amazingly, this is so Jensen, like they become great friends, even though this kid is eight years older than him, like twice his age, basically, from a way different background. Jensen helps him with math and he gets Jensen into weightlifting. So you see Jensen today and you're like, that dude is jacked. He is jacked. He's been weightlifting since he was nine years old. He says about his time at Anita, you know, now I don't get scared very often.

• 9:21David Rosenthal?

  I don't worry about going places I haven't gone before. I can tolerate a lot of discomfort. Boy, does that play out. Wow. In his life, as we will see. So it's pretty awesome. Actually, now he and his wife Lori have given a few million dollars to the school and it's like a amazing institution now. You can see Jensen gave the commencement address in 2020. We're going to link to this in the sources. It's pretty awesome. So after a couple of years at OBI, his parents are finally able to save up enough money to afford to come to the US themselves. So they move first to Tacoma, Washington, the great state of Washington. And then they move a little farther south down to the suburbs of Portland, Oregon.

• 10:06David Rosenthal?

  Jensen and his brother go home. They live with them. They go to public school there. Jensen continues his, uh, his American upbringing. He gets really into table tennis. He places third in the junior nationals in, uh, table tennis. And he gets his picture in Sports Illustrated. No, no way. Pretty amazing. But his parents continue their sort of like academic discipline. And Jensen's super smart, obviously. He ends up skipping two grades and then going to college. He goes to in-state college. He goes to Oregon State University, just down the road a little bit. And he got there when he was like 16, right? He got there when he was 16 because he had skipped a couple of grades. And he loves math, so he decides he's going to major in electrical engineering at OSU.

• 10:50David Rosenthal?

  And he totally falls in love in more ways than one. The first way that he falls in love is, uh, he just thinks like electrical engineering is the coolest thing in the world, becomes one of the top students in the school. He talks about how like he gets mad at the professors because they don't use like enough precision when talking about like exact numbers.

• 11:12Ben Gilbert?

  Which he later comes to say that he respects the opposite position. I think some of the Nvidia employees call it CEO math when he sort of rounds all the numbers and he's like, reflecting back, I do understand what the professors were trying to show is like, the details only matter if you understand the big picture first.

• 11:30David Rosenthal?

  That's so Jensen. Like, he understands, like, yeah, my employees get mad at me when I, you know, round the numbers and use CEO math. Like, I get it. Like, I appreciate precision too, but, you know, like, the big picture is what matters here. The second way he falls in love is with his lab partner in Electrical Engineering Fundamentals, his lab partner Lori, who goes on to become his wife. Such a cool story. So he graduates in 1984, she graduates in 1985, they move down to Silicon Valley, and Jensen joins AMD as a sort of equivalent of like a chip design PM. It's very like engineering heavy, but he's kind of like a PM. He's sort of like helping

• 12:12David Rosenthal?

  as a junior manager of a, of a process for developing a chip. He's working on a then blazing fast 1 megahertz CPU chip.

• 12:23Ben Gilbert?

  Yeah, he talks about this and he says, you know, he's talking about how slow 1 megahertz is and he refers to it and says, you could even see it coming. It's about how fast it was.

• 12:31David Rosenthal?

  You could see it coming from a long way away and still coming and still coming. Amazing. And of course, now he makes literally the fastest chips in the entire world. So he starts at AMD, he starts at night working on a master's degree in electrical engineering at Stanford. It ultimately takes him eight years to finish this master's. He works all the time that he's at AMD and then at LSI Logic where he goes to, we're gonna talk about in a sec. He ultimately does graduate right before they start Nvidia. This is like a super cool bit of trivia. Did you go back and watch the Don Valentine View from the Top?

• 13:08Ben Gilbert?

  No, I didn't.

• 13:09David Rosenthal?

  Lecture at GSP. Oh, I watch that like once a year, every year, every time there's an excuse.

• 13:13Ben Gilbert?

  Is that the one where he holds up Alfred's resume?

• 13:16David Rosenthal?

  It's, yeah, where he holds up Alfred Lin's resume. So also Easter egg in that talk, that was the day that the Jensen and Lori Huang Engineering Center at Stanford was dedicated. And as Don says, Jensen did a building.

• 13:33David Rosenthal?

  Pretty awesome.

• 13:33Ben Gilbert?

  I did watch, he gives a talk where he walks in and gives a talk at Stanford. I think it's the first time that Jensen has given a talk since the building opened. And he says, I've donated, we have this nice building now, so I have no more money.

• 13:46David Rosenthal?

  Yeah, I'm penniless.

• 13:49David Rosenthal?

  Right, right, Jensen.

• 13:52David Rosenthal?

  So great.

• 13:52Ben Gilbert?

  Just to set context for people, if you look at his Nvidia shares, he's worth about $20 billion right now.

• 13:57David Rosenthal?

  I think he owns, what, like 3.5% of Nvidia, something like that? Yeah, he's not penniless. Okay, so he works at AMD for a couple of years. And while he's working there, probably from working on this chip that you can, so fast, you can really see it coming. He realizes that designing chips is really freaking hard. Intel can do it, AMD can do it. But, you know, there's not many companies, it's all like full stack at this time. You know, TSMC doesn't start till 1987.

• 14:25Ben Gilbert?

  Not only are you manufacturing in-house, but for the most part, the like process of designing a chip is a manual one. And so these companies sort of each have their own institutionalized, internal way of working that you design and lay out the elements of a chip.

• 14:42David Rosenthal?

  And Jensen talks about like, when he was in school, the reason he wanted to go to AMD was he thought this was so cool that like you could do it all. And then, once he's actually at AMD, he realizes like, it's actually not cool. Like, it would be cooler if you could be really good at like a certain part of the stack and have tools and platforms and other companies to allow you to allow anybody to make chips.

• 15:03Ben Gilbert?

  Yeah, if there were like, design tools to help you make chips.

• 15:08David Rosenthal?

  So, after a couple of years, his office mate at AMD leaves and goes to join a startup called LSI Logic, which had just gotten public, and we've talked about it on the show. Made Don Valentine and Sequoia the then largest venture return in an IPO in history, maybe the largest venture return ever in history when they went public of $153 million on day one.

• 15:40Ben Gilbert?

  Boy, has venture changed as an asset class.

• 15:43David Rosenthal?

  But I'm trying to think that fund, that probably would have been, I don't know, Sequoia Fund two or three, maybe. I mean, I bet the fund was like, I don't know, 10, 15 million, like, so probably roughly 10x the fund in one day.

• 15:58Ben Gilbert?

  Right.

• 15:59David Rosenthal?

  Pretty awesome. So what was LSI? It was one of the first and was sort of the premier ASICs company, A S I C, application-specific integrated circuit companies. And so what they did and what that meant was they basically made custom-designed chips for other companies. That's what Jensen's kind of thinking about. And the custom-designed chips that they would make, these ASICs, would be like for a very, very specific function that would be integrated into other systems. So like, defense companies, Lockheed Martin and the like, but lots of other companies now too are coming to LSA Logic and the other ASICs companies and saying, hey, we want to create these systems of chips.

• 16:42David Rosenthal?

  You help us design the chips to go into these systems. And yeah, we'll use processors from Intel too. But like, it really helps democratize making and product systems.

• 16:53Ben Gilbert?

  Right. And the idea with ASICs is really if you're not saying, hey, there's going to be a general-purpose computer that this needs to power that can, you know, be super flexible and people might have all kinds of applications that run on it, but, you know, more inefficient in order to get that flexibility chip. Hey, I know the exact thing that this chip will do and it will only ever do this. And so we can actually. Literally hard code that right on the chip. I mean, the actual design of the physical chip can be for this one specific thing. So it's super efficient at this one low level thing.

• 17:29David Rosenthal?

  Yep. And the legacy of Asics today, still around, still used by Asics, but the legacy is FPGAs, Field Programmable Array Chips that are, you know, some might say is sort of a bear case for Nvidia these days, but we will, we will get to that far, far, far down the road. Sun Microsystems was one of their biggest customers and that was how Sun got started and made the chips for their workstations. And in fact, Jensen, when he shows up at LSI, Sun is like just starting and coming to LSI. And so he gets put on the project. He basically embeds with Sun, like in the early days of Sun Microsystems, to help them

• 18:12David Rosenthal?

  build out the chips for what would ultimately become the Spark Station 1, Sun's first big workstation project. Over the next few years, he pretty much exclusively works with Sun while he's at LSI Logic. He works directly with Andy Bechtelstein, who, you know, the founder of Sun and with Benno Kozlov.

• 18:29Ben Gilbert?

  Yeah.

• 18:30David Rosenthal?

  He becomes super well-known and develops quite a reputation. There is somebody who can really like take these visions for chips and these customer requirements from Sun and turn it into, you know, reality and production. So, one day, right around Thanksgiving, 1992, Jensen has finally, after eight years, finished his master's degree at Stanford. And Stanford is quite, quite glad that he finished before this happens. Two of Jensen's buddies, who he's become close with at Sun, Chris Malachowski and Curtis Pram, who, in Jensen's own words, he describes them as really, really fantastic engineers. And when Jensen says that, he means it.

• 19:15David Rosenthal?

  They come to Jensen and they're like, we're not like super happy at Sun, the two of us. We have an idea that we want to talk to you about. And Jensen's like, well, sure. Let's go meet at my favorite spot, Denny's.

• 19:26Ben Gilbert?

  Really?

• 19:27David Rosenthal?

  Yeah, like the man loves Denny's. He worked at Denny's in high school. Like, he's always going to Denny's. He, uh, he orders, uh, the super bird, I think is like his go-to dish.

• 19:35Ben Gilbert?

  Nice.

• 19:35David Rosenthal?

  He's so folksy. I love him. So they go, all have dinner at Denny's and Chris and Curtis pitch him on their idea, which their idea is, it's pretty good. It's pretty good. Tell me as a venture capitalist, if you would fund this idea back then in late 1992. So they see 3D graphics are really becoming a thing. And, you know, remember this is the era of Sun, Alcatraz, all this stuff. It's also the era of silicon graphics, right down the street, right there in Silicon Valley, SGI. So many great things that come out of there, you know, Jim Clark, Netscape, like all this great stuff.

• 20:12Ben Gilbert?

  Jurassic Park.

• 20:13David Rosenthal?

  Jurassic Park is about to come out, comes out in 1993. So there's this huge demand for 3D graphics. The way 3D graphics are done, you need SGI workstations. You need like super custom, you know, very high-end, very expensive stuff. Only something with the budget of like either the military or like a Jurassic Park can afford to do this. But people love it, like the consumers love 3D graphics.

• 20:39Ben Gilbert?

  Not to mention, where are we in the evolution of video game consoles at this point?

• 20:43David Rosenthal?

  Well, we're still in the Super Nintendo days. So we're not at 3D console graphics yet. That's coming very shortly. But what is happening is the PC wave is like really cresting right now, like.

• 20:58Ben Gilbert?

  We're like a year and a half from Windows 95 coming out.

• 21:01David Rosenthal?

  Mm-hmm. And I remember doing this, I bet you do too, our kids in 1992, 1993 doing on their PCs. They're playing. Wolfenstein 3D.

• 21:13Ben Gilbert?

  Oh, yeah.

• 21:13David Rosenthal?

  And Doom. Doom comes out in 1993. These are taking the world by storm and they're made by id, id Software in Texas and John Carmack and John Romero. But Carmack is like doing incredible feats of engineering to get 3D graphics to run on consumer PCs. It took somebody of Carmack's caliber to make this happen and the market loved it. So the idea that Chris and Curtis has, they're like, "We're really great chip engineers. Jensen, you're a really great, you know, chip PM, essentially. Let's make a graphics card. Let's make a chip that can accelerate the

• 21:51David Rosenthal?

  graphics of a normal PC to enable 3D graphics like SGI is doing with professional workstations to enable them for consumer hardware PCs. We know that people love games. This will help the entire industry, you know, take off."

• 22:09Ben Gilbert?

  And you're not even saying-

• 22:10David Rosenthal?

  Sounds pretty good, right?

• 22:10Ben Gilbert?

  That they're gonna try and make it so you can develop games on a PC. You're saying, like, just so you can play games on a PC, right?

• 22:21David Rosenthal?

  Well, both. I mean, mostly that you can play games on the PC, but then you're also gonna have to create, you know, all the APIs and SDKs and developer ecosystem for developers to access this new hardware on PCs. But they'll just develop on PCs. It's really about getting the, like, the hardware into consumers' hands that they can actually play this stuff.

• 22:43Ben Gilbert?

  Hmm.

• 22:44David Rosenthal?

  All right. So what do you think? Is this like a good pitch?

• 22:47Ben Gilbert?

  I mean, so what you're basically asking me to believe, 1992 me, is that video games on PCs are gonna be a thing, that there's gonna be a big economic wave around, that lots of consumers are going to want to do this. They're gonna wanna do it on PCs instead of on Super Nintendo and dedicated systems. Maybe.

• 23:10David Rosenthal?

  Well, I have this proof point of id Software and Wolfenstein and Doom right there. I have like millions of people doing this.

• 23:16Ben Gilbert?

  But still, maybe, because it's not clear that, like, video games are gonna be a giant market. It could be like a kid market, you know, and it could be the case that, like, do you really need- To totally change the development environment? Or can like, there be like five or six different dooms out there? There's five or six CarMax who are all independently geniuses and can figure out how to do all the graphics on their own? Yeah, maybe, but there's a leap of faith.

• 23:42David Rosenthal?

  Yeah, definitely a leap of faith. So, yeah, okay, not totally obvious. But still, like, I think this was pretty fundable, I think, at this moment in time. And the other thing that was going on was in Silicon Valley, these peripheral companies, like, people building chips and cards that plug into consumers' PCs. This was full swing. There are companies making sound cards. There are companies making networking cards. There are companies making serial port cards, like, God knows what.

• 24:11Ben Gilbert?

  Okay, so there's already like, sort of an accelerated computing wave here where people are saying like, there's some reason to do something specialized off the CPU that needs its own integrated circuit, that vendors are making custom, and there's a market to make custom stuff as a vendor for PCs that takes a workload off the CPU.

• 24:30David Rosenthal?

  Yeah, and so the pitch is, we're gonna make a custom graphics card. Take a graphics workload off the CPU specifically for gaming.

• 24:37Ben Gilbert?

  Great.

• 24:38David Rosenthal?

  Okay. So, yeah, it was pretty much a brain-dead yes. But as you alluded to at the top of the show, the problem when something is a brain-dead yes for a venture capitalist is that it's a brain-dead yes for lots of venture capitalists, and lots and lots and lots of companies get funded to do this. But back to Denny's, that night, Nvidia is the first. They are the first dedicated graphics card company. They all decide, the three of them, that they're gonna go in on this. Jensen goes to the CEO of LSI Logic, walks into his office, and tells him that he's

• 25:23David Rosenthal?

  gonna resign. He's gonna go start this company with two engineers from Sun. And this is what the business plan is gonna be. Now, do you know who the CEO of LSI Logic was?

• 25:34Ben Gilbert?

  No.

• 25:35David Rosenthal?

  It was a man named Wilf Corrigan, who was previously the CEO of Fairchild Semiconductor.

• 25:44Ben Gilbert?

  No way.

• 25:45David Rosenthal?

  Damn right.

• 25:47Ben Gilbert?

  So is that how, because Don Valentine, obviously, was the biggest investor in, or Sequoia was, in LSI Logic, and he, did he know him from Fairchild?

• 25:56David Rosenthal?

  Yeah, they were colleagues back in the day.

• 25:57Ben Gilbert?

  Okay.

• 25:59David Rosenthal?

  And then the biggest exit in Sequoia's history to that point in time. So Wilf says, so let me get this straight. And he says to Jensen, you're going to go build these graphics cards and kind of just like you were saying there, Ben, who's going to use these and what for? It's like, well, you know, you're going to be in PCs, they're for gaming, they're for a bunch of kids. And Wilf hones in on the critical question. He's like, well, who makes PC games? Is there a developer ecosystem for this? So that's kind of like, ah, we think if we build it, like, they'll come. So Wilf says, remember, he was at Fairchild. He's like, he knows when to make silicon for specific applications. And Wilf says, all right, you'll be back. I'm going to hold your desk.

• 26:42David Rosenthal?

  But in the meantime, before you go, I'm going to call up Don. I'm going to do, you've done good work for me. I'm going to call up Don. He calls up Don and he's like, Don, I got a kid. He's going to come see you. Stand by.

• 26:55Ben Gilbert?

  Which, this is a lesson for all founders and, you know, aspiring founders out there. Getting a reference from the CEO of a portfolio company is a really good way to come in with a venture capitalist already leaning toward investing, especially if you're referred by the top performing company of all time in their portfolio.

• 27:16David Rosenthal?

  Yes.

• 27:16Ben Gilbert?

  It's kind of hard for Jensen to mess up this pitch with the recommendation that he's coming in with.

• 27:23David Rosenthal?

  It's literally impossible because he goes to see Don. You know, Don, you know, Don sits down and he's like,

• 27:32David Rosenthal?

  So and Jensen completely botches the pitch. He gets like really nervous.

• 27:37Ben Gilbert?

  At this point, I think he had like a partially written business plan that he had like bought a book on like how to start a business and was like three chapters into the book, but decided not to finish and started writing the plan and didn't finish the plan. So he comes into this meeting and just kind of like barfs all over Don.

• 27:53David Rosenthal?

  Yes, exactly. So Jensen's walking out the door. He's like, you know, totally dejected. Don stops him and says, well, that wasn't very good.

• 28:08David Rosenthal?

  But, uh, Wilf says to give you money. So against my best judgment, based on what you just told me, I'm going to give you money. But if you lose my money, I'll kill you.

• 28:22David Rosenthal?

  Classic, classic Don line. So good. So the deal happens. Sutter Hill comes in too, because you know, again, like it lists all dramatized at the end of the day. Like this is a hot deal.

• 28:34Ben Gilbert?

  This is, uh, two episodes in a row for us with Sutter Hill.

• 28:39David Rosenthal?

  I know. Oh geez, they're so good, but it was a hot deal. They wanted it and this fits central casting of at this point in time.

• 28:46Ben Gilbert?

  They invested like a million each. Is that right? For a total of two.

• 28:50David Rosenthal?

  So $2 million total round. I don't know who invested what. I assume a million each, but $2 million total round at a $6 million post money valuation. Remember everybody, this is the eighth most valuable company in the world right now. It started at a $6 million post money valuation. So they're getting things ironed out and there's just one problem. They don't have a name for the company yet. Jensen and Chris and Curtis, they've just been, you know, working on this, working on the business plan, but they don't have a name. They need to incorporate the company and they were saving the files that they were working on for the chip design for the first graphics chip as dot NV. NV being short for next version.

• 29:37David Rosenthal?

  And so like, oh, we kind of like that. You know, we're always working on the next version here. They start looking around in the dictionary for words that have envy in them. It's probably a very short list and they find the Latin word invidia, I N V I D I A, which means envy. And they're like, great, we'll be the envy of the industry. Nvidia will drop the I at the beginning. So we start with envy. This is awesome.

• 30:02Ben Gilbert?

  Of course, they pick green. So later on, they can have that marketing campaign of green with envy.

• 30:07David Rosenthal?

  Careful what you wish for here though, because again, as we've been saying, literally 89 other companies get funded within a couple of months to go do the same thing.

• 30:17Ben Gilbert?

  It's a very clever name. Also, the notion of like vid being in there, that it's sort of video. And that that's another thing that they want to do. Like it's the classic Rich Barton, empty vessel name. You know, there's enough things that it could mean and we're going to fill it with, with meaning because they're doing a thing here that like, well, 89 other people are also sort of simultaneously doing. It is kind of a new frontier that they need to invent and then own like thought leadership in that area. And they do need to kind of like quickly build a brand, not only with consumers, but with PC manufacturers. Jensen, the way he sort of describes it is that their vision, although he doesn't like the word vision because he thinks it's exclusionary to people.

• 31:02Ben Gilbert?

  So he said, our perspective is that they want to enable graphics to be a new medium to tell stories. And here's sort of like the way that he articulates at the time, why video games today are $180 billion a year industry, bigger than Hollywood, bigger than music. It's the biggest entertainment medium. But at the time, he sort of has this thesis that like, you really can't through computer graphics, tell stories today. But if you could, it's. Really interesting because it's not pre-recorded, so it can be sort of new and different every single time you enjoy it. It's also the only medium of entertainment that can be networked. And so therefore, it's the only one that can really be like

• 31:44Ben Gilbert?

  social and interactive. And so our reason for being is to create 3D graphics as a form of artistic storytelling for the future. And everything will be in service of that. And I think that's not really what they are today necessarily. It's a piece of what they are today, but that kept them going for the first 20 years of their existence.

• 32:07David Rosenthal?

  Well, and baked into that is, again, you know, Wilf kind of like hit on it, and you did too, to your credit. You're a very good venture capitalist. You hit on really the key problem with this first iteration of Nvidia, which is they have to go evangelize to developers to like, yeah, there's it and there's Car Mac out there, but like, not a whole lot of other PC game developers out there. Not a whole lot of other 3D PC game developers at this time. There are 2D PC game developers, but they got to convince a whole lot of people to go, you know, learn how to do 3D game development for PCs. And that's like, oh, we're going to enable storytelling all them. So to do that, they have to go

• 32:50David Rosenthal?

  write their own, you know, APIs and SDK and development framework to develop for this new graphics chip that they come out and they have to make a whole bunch of like, technical design decisions that they want the industry to standardize on.

• 33:03Ben Gilbert?

  Right. This is a case study of what happens when you get more clever than the rest of the industry.

• 33:09David Rosenthal?

  Exactly. So at first, things start off really well. Remember, this is super hot, the first company, they're funded by Sequoia and Sutter Hill, like, they land a big deal with Sega to power their arcade consoles and their next generation home console to be the 3D graphics engine and would ultimately become the Sega Saturn. And as we know from our Sony episode.

• 33:36Ben Gilbert?

  Not quite the Sega Genesis.

• 33:38David Rosenthal?

  Not quite the Sega Genesis. Well, so the problem is, so Nvidia and Sega, they're working together. They make a bunch of these design decisions, the biggest of which is they decide that the way they're going to create, you know, people probably know you create 3D graphics, you use polygons, that's why people are always talking about polygons in this industry. They have to decide on a sort of primitive for the polygon. They're like, oh, well, we'll use. Quadrilaterals, four vertex, you know, and anybody who knows anything about video game development now is like, that's not how it's done.

• 34:07Ben Gilbert?

  I'm pretty sure people talk about triangles.

• 34:09David Rosenthal?

  Yeah. And I'm pretty sure if you look at Nvidia's amazing headquarters building today, it's, you know, made out of triangles in homage to game developers, not quadrilaterals. So this becomes a pretty big problem. You know, things go along for a while. It's like fine for about a year and Nvidia's leading. They got this big Sega deal.

• 34:28Ben Gilbert?

  There's not a reason to need standards yet, right? The industry isn't complex enough yet to necessitate a whole bunch of collaboration and set of tools that everyone standardizes on using. You're like, okay, well, we're just gonna put this chip in our game console, ship the game console. We're the only people that, you know, make an SDK, we being Sega. So everyone will have to kind of standardize on this thing anyway. So great. But obviously the ecosystem gets much more complex, much more quickly. And it sure would be nice to have some kind of compatibility.

• 34:59David Rosenthal?

  Well, here's what happens. So, you know, Curtis and Chris and Jensen, they weren't the only people in Silicon Valley that saw that kids want to play games on PCs with Doom. Microsoft is like, oh, that's interesting. We like selling PCs and, uh, gosh, there are all these graphics cards companies out there now that are doing this. And, you know, what do we do as Microsoft? We really want to encourage this in the ecosystem. Well, we create standards.

• 35:30Ben Gilbert?

  We would love it if Windows developers could be able to easily develop for all these new machines, shipping with all these advanced graphics capabilities. Let's make that as easy as possible for those developers.

• 35:41David Rosenthal?

  Yeah, you know, developers want to do 3D graphics directly into Windows without any of this, you know, crusty middleware from some no name company Nvidia out there. Why don't we just bake these APIs right into Windows directly for 3D graphics? We'll call it. Direct 3D. And of course, anybody who knows about the history of this, that becomes DirectX.

• 36:04Ben Gilbert?

  DirectX made some pretty different design decisions than Nvidia had made. Is that right?

• 36:08David Rosenthal?

  Yeah. So they use triangles because triangles make sense. So now Nvidia is really up a creek. Like all of their, you know, the 89 other competitors out there that started later, most of them are like, sure, I'm going to jump on board of this Microsoft ecosystem. Like, I would be dumb not to. It's standardized on this completely different paradigm than Nvidia. And then Sega, you know, they've got Sega, they've got this one sort of customer. And then in 1996, Sega is like, yeah, we're not so sure about this quadrilaterals thing either.

• 36:43Ben Gilbert?

  And just so that like, this doesn't feel arbitrary while we're talking about this. And we're going to say at a super high level on 3D graphics here, rather than really going into the weeds. But a triangle is the fewest vertices in a shape that you can have while still creating a two dimensional shape. And so it serves as a basic building block where assuming you can draw enough triangles and make the triangle small enough, you can form any other shape, any other curved surface. It's sort of the most fundamental building block that you could use to create something that is perceived as 3D.

• 37:17David Rosenthal?

  Yep.

• 37:18Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 37:32David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 37:46Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 37:56David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 38:13Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 38:30David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 38:46Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 38:55David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. So Nvidia, at this point, they're halfway down the road of developing the next chip that they think Sega is going to adopt for what ultimately would become the Dreamcast. Nvidia was calling the NV2. When Sega comes back and says, we're switching horses, we're not going to do this. So like, they're screwed for so many reasons. Everything we've discussed, there's also, in the interim, you know, year and a half since Nvidia started, the price of

• 39:34David Rosenthal?

  memory dropped because, thank you Moore's Law. So Nvidia's chips were designed to be like, super, super tight on memory. And the memory cost about $200 in component, you know, parts to go into their chips. Their competitors have more memory that's costing them like $50.

• 39:54Ben Gilbert?

  And that was just in that one iteration. So it's interesting to note that Nvidia, by being first, and not projecting out the exponential change that would come from Moore's Law, was actually at a disadvantage. Because A, they didn't get a chance to watch and see where the standards were adopted. And so they sort of like picked their own lane and went off in their own direction, which ended up not being what everyone else picked, which put them at a disadvantage. But second of all, Everyone else's cost structure was way lower, or at least everyone else could see that the cost structure was getting way lower. And so Nvidia sort of designed for a constraint that was no longer true by the time everyone else came out with their stuff. At this point, Jensen and his co-founders kind of had to look at each other and say,

• 40:37Ben Gilbert?

  okay, do we scrap everything we did? And if so, how do we not make this mistake again? How do we make sure that in future generations, we sort of premeditate the exponential curve of Moore's Law and prices coming down and design for things that are, you know, two, three, four generations beyond what we actually have available to hardware right now?

• 40:59David Rosenthal?

  So when all this goes down, the company has about nine months of runway left. And like, like literally anybody else, like you pull the plug, like it's over. Like, everything in the deck is stacked against you. Like, you're effed. And I can't imagine sitting there dreaming up a way out of this. But Jensen, God, he's such a G. He's like, no, we're not going out like this. You know, when you hear Jensen talk today about like Nvidia's culture and he says that intellectual honesty is like the cornerstone of Nvidia's culture, like this is what he's freaking talking about. Like, he sits down with Curtis and Chris. And remember, they're like, they're engineers and they've recruited Nvidia 100 plus engineers

• 41:44David Rosenthal?

  into the company at this point and sold them on this technological vision of we're going to define the industry. We set the standards, like we're not going to use some, you know, off the shelf stuff. And like, it's all toast. And so Jensen's like, guys, like this is a pipe dream. We need to throw it all out if we're going to survive. The only thing we can do is standardize on, on the same Microsoft, you know, Direct 3D as everyone else, same architecture. And our only shot is just to like compete on performance and try and become like the best. Chip out there in this now sea of commodity chips. And his co-founders like don't want to do this.

• 42:28David Rosenthal?

  This is not an exciting vision for a Silicon Valley engineer.

• 42:31Ben Gilbert?

  When your CEO comes to you and says that, what they're basically saying is, look, if my job was strategy and your job is execution, the strategy failed. And so we just now need to like literally out engineer all of our competitors. We need to be smarter at engineering decisions so we can be more performant at a lower price point, using less energy than our competitors. Because Microsoft, being Microsoft, had all the developer attention. And because Microsoft set a standard, Nvidia realized, look, we have no ability to uniquely get our own developers, at least at that point in the company's history. And so we must just, on our left, look and see all the developers are coming from Microsoft using this API.

• 43:14Ben Gilbert?

  On our right is all the same consumers and we have to compete just head to head on raw engineering ability with everyone else.

• 43:21David Rosenthal?

  Well, you're saying engineering ability. But remember, like, this is essentially a commodity at this point. So really, it's not just engineering ability. It's how fast can you ship? Like, how fast can you design the next generation of chip? And can you ship it before everybody else? Because everybody knows what's going to be in that ship.

• 43:40Ben Gilbert?

  And why is it, what fundamentally about, was it about graphics cards that made it a commodity?

• 43:47David Rosenthal?

  Well, at this point, like all the other peripherals, and we're going to get into this in a sec, there was nothing that's special about it. They all did the same thing, which was take polygon level 3D graphics processing out of the CPU and onto this other chip on the motherboard, just like sound cards were doing the same thing for sound, just like networking cards were doing the same thing for networking. And it was just like, what's the price performance ratio of doing that? The interfaces and the programming language, that's all standardized by Microsoft. You're just commodity hardware.

• 44:22Ben Gilbert?

  And so what GPUs actually do, or did, at least in this point in time, is say, "Okay, the system is going to feed me in basically point clouds, like vertexes that make polygons that represent like a 3D world. And my job as the GPU is to, as fast as I can, in the highest resolution that I can, or I suppose a standard predetermined resolution-

• 44:45David Rosenthal?

  As fast as I can. And that'll drive the resolution.

• 44:47Ben Gilbert?

  Output a 2D thing that goes on the screen. So I turn 3D stuff into 2D stuff, and I have to do that better than other things that I'm competing against where basically all of us are, when you say commodity, you mean limited by Moore's law, and doing right up to the edge of what integrated circuit manufacturing techniques enable us to do.

• 45:06David Rosenthal?

  Yep. So everybody knows what this means, is that they got to ship faster than their competitors. And they also got to ship faster than their competitors because they're about to go bankrupt. So they draw up this plan that's like, they're trying to thread like the tightest needle possible here. They have to lay off 70% of the company, which they do. They go down to about 35 people. And everybody who's staying knows, we now have to design from scratch and ship a new chip before our runway runs out, which is nine months. You can't do that on a normal chip design cycle.

• 45:39Ben Gilbert?

  Takes like two years, right?

• 45:41David Rosenthal?

  Yeah, the way that, you know, with these fabulous chip companies, the way they would design chips is they would work on the design. They would send them over to the fabulous company. The fabulous company would produce some prototypes. They'd send them back, they'd test them, they'd go back and forth a few times.

• 45:55Ben Gilbert?

  You mean the foundry would produce some, like the TSMC or the Samsung or the global foundries or?

• 46:01David Rosenthal?

  Now importantly, Nvidia is not using TSMC at this point because they can't. They can't. TSMC only works with the best, and Nvidia is not the best. So they're using like second-rate foundries. And that process takes a long time. And then at the end of it, when you're sure you've got the design right, then you do what's called a tape-out of the chip.

• 46:20Ben Gilbert?

  I love this term, by the way.

• 46:22David Rosenthal?

  It harkens back to literally like when you used to tape, you know, masks to like do the photolithography on the chip back in the day.

• 46:29Ben Gilbert?

  So cool.

• 46:30David Rosenthal?

  But it just means finalizing the design.

• 46:32Ben Gilbert?

  But you actually do run it on some prototypes first. Like the foundry sends back some, you know, "Hey, thanks for the designs. Here's the chip, you know, run your tests on it. Make sure everything does what you think it does." And, you know, that process takes two years to get a full sort of iteration on.

• 46:49David Rosenthal?

  Yep. So they're like, we can't do this. So like Jensen's here. Like, here's what we're gonna do. I've heard about there's this new technology, some new machines out there that enable emulation of chips. And in our case, we're going to use it to emulate the graphics chip that we're we're designing, all in software. And it, you know, it works.

• 47:10Ben Gilbert?

  They're startups, but they exist.

• 47:12David Rosenthal?

  The problem is, when you emulate it in software, you know, it's like, it's really slow. So when you play a game and you're looking at your computer monitor or whatever, it's refreshing 30 to 60 times a second. If you're a professional gamer, you probably have it going at like 120 times a second, you know, frames per second. This emulator runs at one frame every 30 seconds.

• 47:34David Rosenthal?

  So they're gonna have to debug this thing in software to save this time, going at one frame every 30 seconds.

• 47:40Ben Gilbert?

  It's just insane.

• 47:41David Rosenthal?

  That's brutal.

• 47:43Ben Gilbert?

  They're basically making this trade off of, okay, if we want to ship something in nine months, we don't have time to actually have it execute on the hardware. So we are going to make the trade off of our testing being mind numbing, like running whatever our graphics tests are, where we're looking for like this certain specified output. We need to plant someone in front of a screen to watch the new frame render once every 30 seconds and look against some tests to verify that the output is correct. And if it is, and this person does that mind numbing work and sits there just observing and observing and observing, then we will go right to manufacturing without ever producing a physical prototype and ship that.

• 48:22David Rosenthal?

  And that is exactly what they do. They had to spend a million dollars just to get the emulator, you know, hardware and software to do this.

• 48:31Ben Gilbert?

  Which I think they had generated some revenue, but it was still like a third of the cash that they had in the entire bank account.

• 48:38David Rosenthal?

  So they go down to six months until their cash out in the company. They get it done in a few months and then they call up their foundry. I don't know if they're using United or one of the, one of the other foundries in Taiwan, not TSMC. They're like, all right, we taped this thing out, send it to production. And the foundry is like, uh, you guys sure about that? They're like, yep, we're sure. Make, you know, 100,000 units.

• 49:03Ben Gilbert?

  If I'm remembering right, I think Nvidia basically was the only customer of that emulation software. Like that was a startup that really wasn't fully proven yet, but Nvidia was like, look, we literally have no options.

• 49:17David Rosenthal?

  Yeah, they were the only customer and then that, that company went out of business after.

• 49:22Ben Gilbert?

  It's wild.

• 49:22David Rosenthal?

  Well, and so the chip they designed, so now the advantage, like this is lunacy, what they're doing. Obviously they have to do it because their back is against the wall. The advantage of this though, is they are now designing this chip with, you know, the same set of assumptions about what, you know, technology is available as all their competitors. But their competitors are working on those designs. They're not going to be able to get them out for like 18 to 24 months. Nvidia is going to get this same, you know, generation of design out in six months. So this chip is called the Riva 128. That's what they call it.

• 50:02David Rosenthal?

  It is a freaking beast and it is like a beast in every sense of the word.

• 50:08Ben Gilbert?

  It's big.

• 50:09David Rosenthal?

  It's big. It's extremely powerful relative to anything else on the market.

• 50:13Ben Gilbert?

  Like more powerful than any customers are telling them they want.

• 50:16David Rosenthal?

  Yeah, way more powerful, way, way, way, way, way more powerful. But you know, it comes with some downs and with great power comes, you know, great responsibility. Because they built this thing in such a manner, it like barely works. Like there's a lot of stuff wrong with it. I forget the exact number of this, but like essentially direct 3D at the time had something like, let's call it like 24, 25 different ways, like different sort of techniques.

• 50:42Ben Gilbert?

  These are the like blend modes.

• 50:43David Rosenthal?

  Yeah, I think that's what it was blend modes and the Riva only works with about two thirds of them. Like one third of them, it just like freaking crashes. Like it just doesn't work.

• 50:51Ben Gilbert?

  I thought even worse than that, but basically like, I think Nvidia had to launch a campaign going around to like all the different developers and being like, come on, what do you really need more than these eight for? Come on, what are you really going to do where you need to use that fancy stuff? Do us a favor for this generation of the chip. These eight were great. You're gonna love them. They're so good and just use those.

• 51:14David Rosenthal?

  Okay, so this is so, so, so great because people do it. And so what they learn from this, like they learn about the market, you know, the first iteration of Nvidia, we're gonna build all this technology, we're gonna drive the market. They didn't know anything about the market. They were just making all these assumptions about what people wanted. But now they're actually going out and Jensen's going to these developers, trying to convince them to do this and they all do it. Why do they do it? Because the only thing that matters is performance. Consumers are gonna buy hardware and games based on the quality of the graphics. This is like being discovered for the first time. And so like, people are willing to make a lot of compromises in, you know, service

• 51:58David Rosenthal?

  of performance. Nvidia is like the first one that figured this this out because they have to go around and do this and developers all get on board.

• 52:06Ben Gilbert?

  And to be clear, it's because the consumer's making the buying decision, right? On what graphics card they buy?

• 52:12David Rosenthal?

  It's, it's a completely interrelated system where the consumer is making all of the decisions. That's where the demand is. The consumer is deciding what hardware to buy. That's what Nvidia's business is.

• 52:24Ben Gilbert?

  Whether they're buying it as a fully like built computer from the OEM or whether they're buying the card to put in later themselves, they're making a decision on what graphics card goes in the computer.

• 52:35David Rosenthal?

  Exactly. And the game developers are making decisions on what graphics cards to support.

• 52:44Ben Gilbert?

  Right.

• 52:45David Rosenthal?

  And how to build their games with like the assumption of what's my target market of consumers? Like, who do I think, will this game run on? Do you need to have at least an X level performance rig in order to run my game or run my game in its fullest form?

• 53:02Ben Gilbert?

  So the developers are premeditating what graphics cards are going to be out in the market when their games launch. And they're saying,

• 53:10David Rosenthal?

  Yes.

• 53:11Ben Gilbert?

  It's going to be the most performant one at the right price point. So whatever the mass market is, we kind of have to target that. And if you're telling us and we're going to test it, and it turns out that yours is the best performance per price, or performance per watt, or whatever, it's the most efficient card, then people are going to buy that one. And so we must target it.

• 53:29David Rosenthal?

  That card that they're going to buy my game. I mean, I remember like, this is a few years later. This is a trope that happened. There was a game called Crysis. C R Y S I S. Remember this?

• 53:38Ben Gilbert?

  Oh, yeah. What's the relationship between Crysis and Far Cry?

• 53:43David Rosenthal?

  It was, oh, no, Far Cry was the first game. Yeah, the Crysis engine, and then Crysis also. It was super convoluted. Basically, my perception of this thing was when this came out, when Far Cry came out, this was like mid 2000s, the graphics were unbelievable, unbelievable. And if you had a rig powerful enough to run it, like just unbelievable. The game itself was total crap. Like, I don't think I ever played more than 10 minutes of it.

• 54:07Ben Gilbert?

  I'm pretty sure if your computer didn't support it, there was all these videos that people would record of like, building a tower of like a thousand gasoline barrels and then shooting it. And because it was too complex for their graphics card to handle, their computer would just freeze. That was the failure mode of Far Cry with non performant chips.

• 54:27David Rosenthal?

  This is how the hardcore gaming industry evolves. Like, Far Cry sold so much software and so much hardware, just because people wanted to experience that, to attempt to experience that level of graphics. And so that's what the developers are starting to figure out. And they're like, all right, well, if you can ship this thing, we'll use only those, you know, eight blend modes or whatever, like whatever it takes. Because we want, you know, graphical performance is the most important thing. So it works. They sell 1 million units of the Riva 128 within four months.

• 55:02Ben Gilbert?

  Wow.

• 55:03David Rosenthal?

  I should have looked what the MSRP was of it. But that is a lot of revenue.

• 55:08Ben Gilbert?

  Yeah, no kidding. What year was this?

• 55:10David Rosenthal?

  This was 1997.

• 55:13Ben Gilbert?

  Okay, so we're, it's an interesting era, like the internet is a thing. We still have a few more years till the dot com bubble crashes. PlayStation one is out, but PS2 is not out yet, I think.

• 55:26David Rosenthal?

  Yep, PlayStation one. And with that, the gaming market kind of bifurcated into like sort of the, you know, the console market, which was standardized and you knew it was all going to work. And then the hardcore PC gaming market, which just had so much revenue potential, even though it was smaller in terms of numbers, because people are willing to spend so much money on this stuff. So at the end of this, Nvidia has now figured out these dynamics of the PC gaming market. And they now have a process within the company to design and ship each next generation of their hardware in a six month timeline, while the rest of the industry is on an 18 to 24 month timeline.

• 56:08Ben Gilbert?

  Necessity is the mother of invention.

• 56:10David Rosenthal?

  To say this is huge is like understatement of the century huge. And it's huge for this market, but nobody even saw this at the time. Like Jensen didn't see this, nobody saw this. They're now shipping relatively, you know, doubling essentially the performance in each generation with their hardware and they're shipping it every six months. And you think about Moore's law, right? Like Moore's law was that the number of transistors on a chip equating to the compute power available at a given price point to the market would double every 18 to 24 months. Nvidia is now on a cycle, starting in 1997, 1998, where they are doubling the performance

• 56:54David Rosenthal?

  that they are delivering at a given price point to the market every six months.

• 56:59Ben Gilbert?

  It's fascinating and they're also competing on a different vector than the CPU manufacturers because. And it's kind of amazing. We've made it an hour into the episode and haven't talked about this yet, but the magic of GPUs is that they're very, very parallel. Like CPUs, for anyone who's taken a low level computing class, you sort of know that like every time the clock ticks, an instruction can sort of run and things move through the sort of long chain of operations that can happen within the CPU and it's advancing things serially through the processor.

• 57:33David Rosenthal?

  It's serial processing.

• 57:34Ben Gilbert?

  It can read from a register or it can add two things together, but like it's all happening serially.

• 57:41David Rosenthal?

  It's like the I Love Lucy, you know, famous one where like the chocolates are coming down the factory pipeline and you had the CPU has to like wrap each individual chocolate, one and then the next one.

• 57:51Ben Gilbert?

  Yes, exactly. And with graphics processing, like the magic of it is that it's super parallelizable. Like there's all these things that need to get outputted to the screen that do not depend on each other. And so you can do them independently. And so the vector that they're competing on is really like, oh, we can, and it would be years before they would really get to this, but add more and more cores or find more ways to execute more instructions simultaneously to parallelize these tasks. And I think at the time, people thought really the only big use case for parallelization is graphics. Let's put a pin in that for now, but it's worth knowing the thing that they're doing

• 58:34Ben Gilbert?

  is figuring out how to process more things in parallel faster.

• 58:38David Rosenthal?

  Yes. So graphics cards like Nvidia is making at this point in time are really good at in parallel lighting the pixels on a screen, you know, 30, 60, 120 times a second with the images that are being fed to them from like the game or the graphics program, which is living all in the CPU land. So like you're a game developer, you develop in, you know, Microsoft Direct 3D becomes DirectX or OpenGL is the open source competitor to this. You know, all that logic is really happening in the CPU realm. And what that

• 59:19David Rosenthal?

  means is like, if you think back to games from this time, you know, think console games, PlayStation one, even PlayStation two and 64.

• 59:30David Rosenthal?

  You look at the graphics in those games or PC games from the time too.

• 59:34Ben Gilbert?

  They're all kind of the same.

• 59:36David Rosenthal?

  They're all the same, right? All the lighting, like the lighting, it's all like pre-done. So like when you're a game developer, you set the scene. You'd never see like a character running around carrying a torch and that torch's light like impacting the rest of the environment. It's all set in advance, like no intelligence is happening in the GPU level with the screen. It's just lighting up the pixels.

• 59:59Ben Gilbert?

  Basically, in order to make it easy for developers, the software development kit is written at such a high level that you don't really get enough control to make your game stylistically different. You just get to lay out the items on screen.

• 1:00:16David Rosenthal?

  It's all the same. It's all flat. Maybe you can program that like hard code that like, oh, time of day might change. And like, that might change the way things look, but you're hard coding like what they look like. No computation is happening.

• 1:00:28Ben Gilbert?

  Right.

• 1:00:29David Rosenthal?

  If you're playing a game today, even the most basic, you know, mobile game or whatever, you're seeing dynamic lighting and shading, which we'll get into in a sec, all over the place. So this is still like in the, you know, GPUs are like a really, really important sort of commodity, but they're a commodity. There's not a lot of smarts happening here.

• 1:00:48Ben Gilbert?

  Yep.

• 1:00:49David Rosenthal?

  No programming, but Nvidia has figured this out. They can now ship on a six month time cycle. They're starting to like, really take huge market share. Now, a lot of people start paying attention to them in a good way. TSMC that wouldn't even return Jensen's calls back in the day. There's this amazing, amazing story. Did you watch the TSMC 30th anniversary?

• 1:01:12Ben Gilbert?

  I did.

• 1:01:12David Rosenthal?

  Celebration. This is so, it's like three hours on YouTube.

• 1:01:15Ben Gilbert?

  This is worth a brief aside. This is how much pull Morris Chang from TSMC has. He gets the CEOs on stage of Nvidia.

• 1:01:25David Rosenthal?

  ARM.

• 1:01:26Ben Gilbert?

  ARM, ASML, Qualcomm and Broadcom.

• 1:01:31David Rosenthal?

  Yep. I don't think Lisa from AMD was there.

• 1:01:34Ben Gilbert?

  No, it's basically everyone but AMD of that sort of pillars of the TSMC ecosystem. I mean, Morris is playing interviewer, like it's very entertaining to watch him.

• 1:01:44David Rosenthal?

  It's like a celebration of Morris and of TSMC. It's amazing. It's amazing.

• 1:01:48Ben Gilbert?

  Yes.

• 1:01:49David Rosenthal?

  So in the section with Jensen.

• 1:01:53David Rosenthal?

  They tell the story of how Nvidia, at this point, it's got to be TSMC's biggest customer. I mean, they've been like tied at the hip forever of how this all came to be. After the Riva 128 hits and it's become a big success, Jensen writes a letter to Morris, like a physical letter, addresses it to Morris Chang in Taiwan.

• 1:02:16Ben Gilbert?

  Because he can't get in touch through any of the like, salespeople.

• 1:02:19David Rosenthal?

  Exactly, exactly. They've all just been ignoring him as well. They should because they were a, you know, left for dead startup in a sea of startups. The letter gets to Morris. He opens it. He reads it in Taiwan. He does the most Morris Chang thing possible. He calls up Jensen on the phone right there. And the phone rings as they tell the story in the Nvidia office. This is in the middle of their trying like mad scramble as a startup to ship these Riva 128s that are coming in, they're testing them all by hand in the office. Cause none of this stuff was, it's fresh off the line. It's not been tested. It's chaos. Jensen picks up the phone and is like, yeah, who's this? Morris is like, hello, this is Morris Chang at TSMC. I got your letter.

• 1:03:04David Rosenthal?

  And Morris says that there's like a silence on the other end for a couple of seconds. And then he hears Jensen yelling, everybody shut up. Morris Chang is on the phone.

• 1:03:16David Rosenthal?

  Oh, amazing.

• 1:03:17Ben Gilbert?

  And that's how TSMC became the manufacturer of Nvidia chips.

• 1:03:21David Rosenthal?

  Yep. The next year, the two companies sign a huge multi-year deal for TSMC to become the primary foundry for Nvidia and still are today. Jensen and Morris are super close. It's a landmark, landmark deal for both companies. So with now an actually really good foundry as their partner and this super unique chip development process, Nvidia just keeps accelerating. So in 1999,

• 1:03:52David Rosenthal?

  They rebrand their products. You know, they'd use the NV1 first and then this Revo 128. They actually run a little contest of what they should name the products and the winning name is Geometry Force, Force is with you, which they shortened to GeForce, which anybody who knows who, you know, buys graphics cards, the Nvidia GeForce, still the brand name they use for their gaming cards today and is probably the most, one of the most respected, you know, brands in the gaming ecosystem. And it's because this card that they ship, the first GeForce in 1999, it's the GeForce 256.

• 1:04:33David Rosenthal?

  It's so powerful. It has 5X better graphics performance than like anything else on the market.

• 1:04:42Ben Gilbert?

  And they call this like the first GPU, right? Don't they say like, we're inventing the GPU?

• 1:04:47David Rosenthal?

  They call it a GPU. Before this, the term GPU didn't exist. It was, these were graphics cards, graphics chips.

• 1:04:54Ben Gilbert?

  I think Sony had like, sort of used it about the PlayStation, but no one's marketing this idea.

• 1:05:02David Rosenthal?

  So they market this as the graphical processing unit. Now, on the one hand, that's like, sort of like marketing bravado. On the other hand, that is like a very loaded statement to make. And why so? What does Jensen and Nvidia mean by this? So Intel, you know, you think chips, you think Intel, right? You think silicon, you think Intel. Intel's whole strategy at this point in time was basically, they're almost like a biotech company today, like one of the big pharma companies and, or put another way, it was another version of the Microsoft embrace, extend, extinguish thing. They would

• 1:05:45David Rosenthal?

  see, there are all these peripherals, sound cards, networking cards, all the graphics cards, all the stuff we've talked about. They would let all these flowers bloom, be like, oh yeah, yeah, yeah, just plug into the PCI slots on our motherboards. No big deal. We're an open ecosystem. We want everybody to flourish. And then they would see which of these, you know, peripherals got consumer traction.

• 1:06:07David Rosenthal?

  And then they would just turn them into, you know, a component in the motherboard.

• 1:06:11Ben Gilbert?

  And thus began the wave of being able to buy a PC with an Intel motherboard and integrated graphics.

• 1:06:19David Rosenthal?

  Well, and before that, you know, integrated sound, integrated networking, like remember, um, oh, so fun doing this research. Remember the company Creative and the Soundblasters cards?

• 1:06:28Ben Gilbert?

  Oh, yeah.

• 1:06:29David Rosenthal?

  I remember buying tons of that stuff like, and then at a certain point you stopped buying Soundblaster cards, right?

• 1:06:34Ben Gilbert?

  You're like, oh, the motherboard does 90% of what I needed to do. And why would I spend extra money on a separate thing?

• 1:06:41David Rosenthal?

  Exactly. And so Intel, they just sit back and watch all this happening. They'd integrate it game over for the startups.

• 1:06:48Ben Gilbert?

  And there was like reasons for specialized stuff. Like I remember buying a special network card because the integrated networking capability of the motherboard on my, I don't know what it was, a Mac 8500 or something wasn't as fast as like, if you bought a dedicated PCI card, that could be a faster networking card. And graphics cards would sort of become that same thing where the integrated graphics for most people was good enough, unless you were a gamer, in which case you'd go buy your own graphics card, or you'd buy it directly from the OEM when they were making the computer and shipping it to you.

• 1:07:22David Rosenthal?

  But wait a generation or two, even if you have the most demanding performance for home networking, you're not buying a separate networking card. Like get out of here.

• 1:07:30Ben Gilbert?

  These things are like dead end businesses.

• 1:07:32David Rosenthal?

  And there's no reason why graphics cards wouldn't be the same. So Jensen and Intel coming out and being like, we're a graphical processing unit. We're a GPU. It's a big middle finger to Intel and this whole CPU dominant world.

• 1:07:50Ben Gilbert?

  And it really wasn't true yet. It wasn't a processing unit in the same way that a CPU was a processing unit where it was, people could write software for it in a way that created a meaningfully different experience for people using the software.

• 1:08:04David Rosenthal?

  Yep. But. This is where Jensen is just such a master strategist and Nvidia is so great. Like this whole kind of orchestration of a bunch of things all hit over the next couple of years. So first Nvidia goes public. They've now shipped the Rebon 128 was a huge hit. This new GeForce 256 flying off the shelves. They go public in, beginning in 1999 at a $600 million market cap. So a 100x return from the $6 million post-money valuation on the Sequoia and Sutter Hill round. That gets them some more capital. And then behind the scenes, they're working, they're in talks with Microsoft. Microsoft's got a secret

• 1:08:48David Rosenthal?

  project that they're working on at this time, the Xbox, which we talked about a lot on the Sony episode and so many times on the show. And Microsoft comes to Nvidia and like, we want you to be a key supplier of the graphics, the GPU for the Xbox. And they do a huge, huge deal, $500 million a year deal for Nvidia to supply the graphics for the Xbox with a $200 million advance. And the chip that they use is a modified version of this incredible

• 1:09:28David Rosenthal?

  new chip that Nvidia is working on. I sound like Steve Jobs here. Jensen sounds like Steve Jobs talking about this. The GeForce 3, which introduces for the first time programmable shaders and lighting on the GPU. Everything we just talked about though, like the GPU massively parallel, can light all these pixels, but it's essentially just taking instructions that are pre-hardcoded, baked in on what the lighting's gonna look like. Now you can program for these GPUs and you can make dynamic lighting in games and 3D graphics that is calculated.

• 1:10:10Ben Gilbert?

  This is game changing. The way to think about it is those GPUs in quotes were fixed function graphics accelerators. So they would be able to map textures onto a set of polygons, but you couldn't do the thing that you're talking about, David, custom lighting, a lot of that sort of stuff to actually program at the GPU level what is happening. And so this is like, of course, it's cool because it's a wave of new consumer experiences that can happen because every game developer can kind of stylistically put their own stamp on games. But it's a totally different metaphor for the computer architecture where suddenly you can program a GPU. And I guess that's why they're calling it a GPU. And this is different than a graphics card.

• 1:10:55David Rosenthal?

  And Nvidia develops in conjunction with this. They call it CG, literally like they extend the C programming language with graphics libraries and capabilities to directly program graphics and lighting and shaders for the GPU. So this makes, you know, that sort of like marketing, you know, oh, this GeForce 256, it's a GPU. Now it's real. Like, this is a graphical processing unit that is intelligent, that is every bit as, you know, maybe not every bit as important as the CPU yet. But like, this is like the stake in the ground of like, this is no sound card. This is not going to get commoditized.

• 1:11:37Ben Gilbert?

  Do you know if this was the GeForce FX or if the GeForce FX was a similar version of this that was available to PC?

• 1:11:45David Rosenthal?

  That's a good question. It was the GeForce 3 was the PC version of this.

• 1:11:49Ben Gilbert?

  Okay. This move to programmable shaders was a bet the company move and it was

• 1:11:56Ben Gilbert?

  Jensen's answer to how do we get out of this commodity business and do something unique and different? And I'm pretty sure they were like months away from cash out again by pulling this move because of how aggressively they had to staff this like very new type of product they were inventing.

• 1:12:17David Rosenthal?

  Yeah, I mean, this is the, you know, back to that original sort of quixotic vision for the company of we're going to create an industry, we're going to create the APIs, the SDK to interface with it. We're going to do all this. Like now they're doing it and they're doing it with Microsoft this time instead of like against Microsoft. So like A plus move there.

• 1:12:38Ben Gilbert?

  Yeah.

• 1:12:38David Rosenthal?

  But yeah, like the amount of capital investment that went into this was enormous. So at this point, Intel's like, we might have a problem here.

• 1:12:50Ben Gilbert?

  Right. It's going to be more difficult than we thought to just take whatever these people are doing and integrate it directly into our, our motherboards.

• 1:12:57David Rosenthal?

  Yep. And irony of ironies, Jensen presses this even further. He does a big partnership with AMD.

• 1:13:03Ben Gilbert?

  It's worth knowing here when you're saying AMD, because people probably know AMD and Nvidia are big competitors today in the GPU world.

• 1:13:09David Rosenthal?

  Not yet.

• 1:13:10Ben Gilbert?

  Right. AMD primarily made CPUs at this point. They made processors and competed with Intel. They hadn't yet bought ATI, which is where the Radeon business comes from. That's all the graphics stuff that they do today.

• 1:13:22David Rosenthal?

  Yeah. ATI at this point was the number two competitor to Nvidia. Actually, an amazing story, too. It was a Canadian company, started in the eighties and pivoted into graphics cards, like very different, you know, I feel like there's a lesson in here, right? We could talk about this in playbook, but like when all the VCs funded these 90, you know, Silicon Valley startups to go make graphics cards, 3D graphics cards, the only two surviving ones were Nvidia, which went through this hellish journey. And then these Canadian guys that were like totally out of the ecosystem and like did it sort of more, more bootstrapped way and evolved into the space.

• 1:14:00Ben Gilbert?

  Jensen has a great quote about this, and he's giving this lecture at Stanford years later. And he says, "When technology moves this fast, if you're not reinventing yourself, you're just slowly dying. You're slowly dying, unfortunately, at the rate of Moore's law, which is the fastest of any rate that we know."

• 1:14:18David Rosenthal?

  Yep.

• 1:14:19Ben Gilbert?

  It's so clarifying of how he thinks about why Nvidia needed to do these like three complete transformations of the company, bet it all, risk it all. Cause if you're not, you're one of those 89 companies.

• 1:14:32David Rosenthal?

  Exactly. So Intel's like, holy crap. We might have a problem on our, not, not a problem. Like this is not a problem for Intel.

• 1:14:41Ben Gilbert?

  It just is a thing they're going to have to deal with instead of it being part of their extinguish strategy.

• 1:14:46David Rosenthal?

  Right. Intel is used to at this point, just, you know, like Microsoft at this point, oh, sure. You know, you want to go make word perfect. Uh, we'll, we'll let you do that. We'll see these great applications and then we'll go make our own. That's what Intel's doing. And now this is the first example of like Intel's gonna have some trouble doing this on their own. So they actually at first come out with their own dedicated Intel graphics, you know, GPUs, graphics cards competing as separate cards. I don't know that Intel had ever done. I mean, maybe speaking out of turn here, but like as far as I know, I don't, this is not a common strategy for Intel. It's usually integrate into the motherboard and the CPU. They come out with their own external cards right around

• 1:15:30David Rosenthal?

  this time, like 1999 to directly compete and like they suck. Like these are like some of the worst reviewed graphics cards in history.

• 1:15:38Ben Gilbert?

  Talk about not your core competency.

• 1:15:39David Rosenthal?

  Not your core competency.

• 1:15:41Ben Gilbert?

  And it really illustrates how different Nvidia's approach was to what graphics cards had been before and building programmable shaders and creating CG, which was a little bit of an early strategy and something they would later do with CUDA, uh, but really understanding that like, oh, we can differentiate our hardware, not only with interesting hardware features, but by building software on top that it only works with our hardware, but makes it really great for developers to develop for our thing.

• 1:16:10David Rosenthal?

  So Intel does make a big push and this actually, you know, ends up becoming a great strategy for them into integrated graphics. So they do try and integrate this, but it's never good enough for the high end. It's only good enough for if you don't care about graphical applications for laptops and the like. And, and that's great. You know, that ends up, you know, that's a big market for them for a long time. And especially leading into, you know, mobile, although Intel and mobile is a story for another day. But for the hardcore market, and that's, that's making it sound too small, for the market of anybody who cares about graphical performance and quality, which is not just gaming at this

• 1:16:51David Rosenthal?

  point, you know, it's 3D modeling, it's architecture, it's lots and lots of graphical, high-performance graphical computing applications. You're always going to want, it's this dynamic and it sets up just like Moore's law. Whatever the current maximum is, it's not enough. It's never enough. You always want more. As good as graphics are today, it'll never be good enough. 10 years from now, game graphics will make today's graphics look silly and we'll all be in the metaverse or the omniverse if Nvidia has their way. But it still won't be good enough. Like it's Moore's law. You always want as much performance as possible.

• 1:17:26Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:17:39David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:17:56Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:18:11David Rosenthal?

  And that's how you get features that customers love like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:18:35Ben Gilbert?

  And they recently launched Legora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:18:54David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:19:24Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you. Okay, David, so Xbox comes out, Nvidia has a card in there that is the GPU of the Xbox that has programmable shaders. So rather than literally just spitting out triangles to put on screen, they actually are running these little programs in shaders.

• 1:20:08Ben Gilbert?

  It's super cool. What happens after that?

• 1:20:11David Rosenthal?

  Basically, the company goes like supernova, in a good way, in a good way at this point in time. So the fiscal year that ends January 31, 1999, this is like right before they go public or right as they go public, they did $158 million in revenue.

• 1:20:29David Rosenthal?

  The next year, the fiscal year ended January 31st, 2000, so like the calendar year 1999, they do $375 million in revenue. So more than double that year.

• 1:20:41Ben Gilbert?

  Wow.

• 1:20:41David Rosenthal?

  The next year, they do $735 million in revenue. The year after that, which is basically the calendar year 2001, the year the Xbox comes out, they do just about $1.4 billion in revenue.

• 1:20:57Ben Gilbert?

  Which makes them the fastest semiconductor ever to reach a billion in revenue and gets them added to the S and P 500.

• 1:21:04David Rosenthal?

  Indeed. This is the company's essentially ninth year of existence. They're already doing over a billion dollars a year in revenue.

• 1:21:11Ben Gilbert?

  Throughout the company's history, they basically have these like six to 10 year epochs. And during those, they have like a meteoric rise when they do something contrarian that's off the rest of the industry. And then it starts to taper and they need to figure out how to reinvent themselves again. And so we sort of saw it the first time before the competitors come in and then the competitors come in and then we see it again with them figuring out, we got to do the emulated version of letting our engineers design the chips and lay out the chips so we can be faster than everyone. And then everyone sort of catches up and then they have to do it again with programmable shaders, launching those to the industry. And then they have these few amazing years. After that, there is kind of a plateau again, and you can see it in their revenue. They did

• 1:21:56Ben Gilbert?

  obviously close to $2 billion as we moved through 2001. They stayed reasonably flat for a few years after that. I think they eventually did 2.8 billion in 2005, but it was kind of barely profitable. Like they never lost money, but net income for each of those years was only a couple hundred million or less. So it's not like they're this like super free cash flow positive company. They're not adding to their cash pile in a meaningful way. You can start to see competitors figure out programmable shaders too.

• 1:22:27David Rosenthal?

  Yep. ATI, of course. And then in 2005, I think it is AMD.

• 1:22:34Ben Gilbert?

  That's where they start shopping around. Oh, six is when the transaction actually happens.

• 1:22:37David Rosenthal?

  They buy ATI. And of course now AMD is the main competitor to Nvidia. So.

• 1:22:45David Rosenthal?

  We're going to tell those stories on the next episode, but basically like a little sort of teaser, what's going on here? They kind of take their eye off the ball in the gaming market. Now, maybe that's too harsh. I don't know what Jensen would say about that. But right around this time, there's something that ultimately becomes pretty amazing that happens, which is they've achieved the dream at Nvidia. They've created a programmable GPU. It is truly a GPU. It rivals the CPU. This is the model. They have driven forth this new industry of computer graphics, enabled a whole generation

• 1:23:29David Rosenthal?

  of storytellers to program their GPUs and tell stories. A whole new class of users and developers starts to tinker around with these GPUs. And Jensen likes to tell a little story that's probably apocryphal, but you know, hey, we'll repeat it here as a little teaser for next time. Right around, you know, sort of the early 2000s, a quantum chemistry researcher at Stanford calls up Jensen and he's like, I need to thank you because, you know, I do this, this work in my lab on these supercomputers that we have at Stanford and I write these models

• 1:24:14David Rosenthal?

  for the molecules that I'm researching and it takes a couple of weeks to, you know, finish the computation on these models. Well, my son, who's a gamer, he told me that I might want to try going over to Fry's, the local electronics store and buying a bunch of your GeForce cards. So I did, and that I should try porting my models into CG, into your, you know, graphics computer language and just see what happens. Well, I did it and my computation finished in a couple of hours. So I waited a couple of weeks for the supercomputer here at Stanford to finish. I checked the results and they were identical.

• 1:24:55Ben Gilbert?

  Boom.

• 1:24:57David Rosenthal?

  Boom. And he's like, so I just want to thank you, Jensen, for making my life's work achievable in my lifetime. This is for sure something that Jensen made up. Maybe he did, maybe didn't.

• 1:25:08Ben Gilbert?

  It's probably cobbled together from a few different people's experiences.

• 1:25:11David Rosenthal?

  Probably. It's a composite, but every word of it is true in spirit.

• 1:25:16Ben Gilbert?

  Yes, there is a whole industry called scientific computing or a whole segment that Nvidia would be able to address in the future. But they need a whole lot of tools to be built for them to be able to really use GPUs for all those purposes and more with machine learning and everything else. But right now, yes, you are buying off the shelf G-forces here in this mid 2000s era and trying your best to sort of hack them together to do your super parallel processing task that is not specifically building a cool video game. What's interesting is the industry perception around this time was that Nvidia had started to sort of focus on this high performance computing segment

• 1:25:58Ben Gilbert?

  and that they were starting to take their eye off the ball in gaming. So people were starting to think like, oh, maybe ATI is actually more interesting as a gaming specific graphics card maker at this point. And there's a little known fact that is, so you mentioned this AMD ATI deal and like, we all think the AMD Radeon at this point, you don't think about the ATI Radeon, which was the, it was the, I think they retired the ATI brand in 2009. But AMD's first choice was actually Nvidia. So AMD tried to buy Nvidia to make that their graphics line. And it was possible because it's not like the stock was blowing up at this point in time.

• 1:26:40Ben Gilbert?

  And it had this sort of few years of reasonable stagnation before we get into late 2006, 2007. And certainly people didn't see the machine learning market. People didn't really see the scientific computing market and it was like, hey, maybe this company needs some guidance from a smart company like us, AMD. And so they make the offer and there's the cover story on Forbes. We'll put it in the show notes, but there's this article that comes out called Shoot to Kill. And Jensen.

• 1:27:12Ben Gilbert?

  In this merger acquisition talk with AMD insisted that he be the CEO of the combined company, and that is the thing that blew up the deal. And instead AMD went and bought ATI and the rest is history.

• 1:27:26David Rosenthal?

  Oh, man. That is such a good what would have happened otherwise. Well, should we use that to transition into analysis for this one?

• 1:27:33Ben Gilbert?

  Yeah, let's do it. So I thought it'd be fun to do narratives. Like, let's take it from this point in time. The AMD ATI deal has just happened. We're sort of looking forward. It's 2006. You know, what's the barren bull case for the company? And I thought an interesting data point to sort of ground this discussion would be that if we look at the gross margins today for Nvidia, which we will talk in our whole next episode about everything that they do that's so insanely differentiated. They sell their GPUs at a 66% gross margin. Hardware business with a 66% gross margin. Back in 2004, that gross

• 1:28:13Ben Gilbert?

  margin was only 29% that they were able to command as a premium on their cards. And so you can kind of see, like, all of their economic potential was being competed away, and they weren't doing anything to differentiate in a way to get any sort of pricing power. And so you think you make that 29%, then you need to use that to pay all your overhead and fix costs and your engineers and develop the next product and pour it into R and D. And sure, they had a few great years of doubling in revenue after going public, but it's not looking great right now in 2006.

• 1:28:50David Rosenthal?

  Yes. And there's also another reason why their gross margins are so low in those years following 2001. So they made this deal with Microsoft, right, to power the Xbox. And it was absolutely the right strategic decision to power the Xbox, to get Microsoft's support in creating CG for programmable shaders, you know, protect themselves from Intel. But if you're going to deal with Microsoft, they're going to extract their pound of flesh.

• 1:29:30David Rosenthal?

  So you'll note, there are three game consoles in the history of game consoles that Nvidia has powered. The original Xbox, the PlayStation 3, which we'll talk about next time, and the Nintendo Switch. They have not done any others.

• 1:29:51Ben Gilbert?

  Really?

• 1:29:52David Rosenthal?

  And people always like asking Jensen about this and whatnot. He's diplomatic about this, but because it's a crappy gross margin business, right? Like, yeah, there's a $500 million a year revenue deal with Microsoft. $500 million a year when their whole company revenue is a billion. Well, that's $500 million a year of very low gross margin revenue.

• 1:30:15Ben Gilbert?

  Yeah, I think the way that he talks about this sort of opportunity in the talk that I watched him give, he didn't name names, but he says, people always ask me, you know, they come to me and say, Jensen, why aren't you making this great game console GPU? Like, what a waste. Why wouldn't you do that? And he always talks about it like there's a lot of things we could spend our resources doing. And if I don't think that we can do anything really unique and special and really change the world, then we have better things to spend our resources on. And that is kind of Jensen speak for like, no, there's crap margins in that. I'm not doing that. But he is right that like, given a finite amount of resources, you have to allocate your capital and your resources in the most optimal, both short-term cash flowing way, but also long-term strategic way.

• 1:30:58Ben Gilbert?

  You know, it seems like from their sort of analysis, especially recently with game consoles, sure, we might be able to make some low margin revenue on it, but it's not strategic for us long-term to do that.

• 1:31:08David Rosenthal?

  It's probably at this point in time, a little too much of an exaggeration to say that they're out of the fire and into the frying pan, having solved their Intel existential strategic challenge and ending up now sort of at odds with Microsoft. That's too much, but there's a lot of truth to that. So, you know, if you're looking at this stock in those years, especially as revenue starts to flatten, and a big part of that is coming out, you know, towards the end of the Xbox generation of consoles leading into the Xbox 360, which of course Nvidia does not power. That's a lot of gaming revenue, top line revenue going away. Meanwhile, they're spending tons of resources investing in this new high-power computing segment for these researchers.

• 1:31:54David Rosenthal?

  You're a little bit like. Okay, Jensen, do you really know what you're doing here?

• 1:31:59Ben Gilbert?

  And in 2006, Intel launches or announces this project, Larrabee, where they're going to be like a full-fledged GPU maker. I mean, this is like a totally second foray of Intel's really into this. So you're like, okay, you've had to like,

• 1:32:14Ben Gilbert?

  be this commodity where you're living on Intel's motherboard. Customers are only choosing to buy your product when the integrated card isn't good enough for them. The person that makes the integrated card is now announced they're going to be like a real, honest to goodness GPU maker. So like, are you betting the farm on scientific computing?

• 1:32:32David Rosenthal?

  How big is that market?

• 1:32:33Ben Gilbert?

  So the answer is yes. And that is also the bull case. And it turns out, scientific computing would be so much more than scientific computing. And it would be, you know, the acceleration of all the other things in our computing world that has been very advantageous to become parallelizable. But I will leave it there so I don't have too many spoilers. But that is 100% the bull case and 100% of what happened.

• 1:32:57David Rosenthal?

  Yeah, it's interesting. We're working on an episode, episode two with Hamilton Helmer and his colleague Chen Yi at Strategy Capital about power.

• 1:33:06Ben Gilbert?

  Specifically with platforms, how to apply power to platform businesses.

• 1:33:11David Rosenthal?

  It probably won't be out yet when this episode comes out, but it'll be coming out shortly thereafter. They make the point, and it's a very, very valid one, that like, when you climb the mountain as a founder in a company of finding product market fit, it's very different than climbing the mountain of then having to go develop power. It's a whole second journey that you have to go on.

• 1:33:35Ben Gilbert?

  It's a whole second invention. And at this point, Nvidia had definitely found product market fit, but had not yet found their source of power.

• 1:33:45David Rosenthal?

  So, you know, if you're looking at this company at this moment in time, especially as revenues flattening, coming off the Xbox contract, costs OpEx is going way up, investing in this sort of speculative new area.

• 1:34:01David Rosenthal?

  I can totally see looking at this and being like, wow, this is yet another Silicon Valley startup that had immense product market fit, top line revenue soared, but now we're kind of coming to the end of that. And there's not a lot of power, you know, as defined by sustainable, you know, economic profit, you know, operating cash flow coming out of this thing.

• 1:34:25Ben Gilbert?

  So then, as we talk about power here, what power do they have? And for listeners who are newer, this is really the what is it that enables the business to have persistent deferential returns or sort of in a sustainable way, be more profitable than their closest competitor? They really didn't have power. I mean, I'm trying to think which of the seven powers can we make the best case that they did have? It's not switching costs. The switching costs are crazy easy.

• 1:34:54David Rosenthal?

  So switching costs is interesting, right? Like, I think they were trying really hard to develop it. They did a really good job. I mean, they made CG in collaboration with Microsoft. And CG works on Nvidia products, but it's not like CUDA today to flash forward to next time.

• 1:35:15Ben Gilbert?

  Yeah. So it was like they had the inkling of how they could get power, but it was not yet implemented.

• 1:35:20David Rosenthal?

  And Microsoft didn't have a lot of interest in helping Nvidia create huge switching costs there.

• 1:35:26Ben Gilbert?

  Right. Cause Microsoft wants to play Switzerland. Like, hey, anyone that is an application developer for Windows should be able to use whatever hardware is on any PC in a really great way. And so we want to commoditize all of our suppliers.

• 1:35:40David Rosenthal?

  So maybe some, an attempt at switching costs that was not fully realized. I think they probably thought and did for a while have process power in this six month shipping cycle that none of their competitors could match for a while.

• 1:35:54Ben Gilbert?

  Yep.

• 1:35:54David Rosenthal?

  But certainly the delta of Nvidia's shipping cycles versus competitors compressed over time.

• 1:36:01Ben Gilbert?

  Okay, playbook? I have one big one that we have not discussed. We sprinkle in lots of playbook themes, but there's one to me that I want to call out and draw a through line to something that's happening with Nvidia today. And that is simulation. So there's a thing that we're going to talk about a lot on the next episode, which is totally changing the world as we know it, which is things that we used to have to do physically, we now do in simulation. An obvious example of this is Boeing doesn't take every part and throw it into a wind tunnel. Well, maybe Boeing does, but the zillion new space startups certainly don't do that. They simulate the atmospheric effects on stuff and it happens way faster and it lowers your iteration time.

• 1:36:45Ben Gilbert?

  And another one is drug discovery. Like you look at how fast we came up with coronavirus vaccines, simulation, it's an absolute miracle. And everything in our world is being compressed 10 times, 100 times faster because we're able to simulate it rather than needing to do it in the real world. The interesting thing is a lot of that is actually powered by a lot of the machine learning advances that Nvidia is doing in today's world with cool things that you can do on GPUs. But the reason I'm talking about it in this episode is that DNA comes from the fact that in order to survive, when they had nine months left, the way that they saved themselves was with simulation.

• 1:37:26Ben Gilbert?

  So it became very clear to the company very early on, the benefits of being able to simulate something rather than having to do it in the real world.

• 1:37:36David Rosenthal?

  Similarly, a playbook theme I wanted to highlight that we have not talked about explicitly yet is just the power of like democratizing tools for developers. You know, and Jetson really saw this back in his AMD days before going to LSI logic. But the ability for Nvidia to use an emulator, a software emulator, to design their chips. And then of course, the massive, massive strides that the EDA industry has made since then. And then Nvidia itself, you know, enabling, you know, we haven't really talked about it as much, but. Like Jensen and Chris and Curtis's original vision did come true.

• 1:38:18David Rosenthal?

  Like they created a new artistic platform for artists to tell their stories. And without this industry and all the hardware, software tools that went into creating it, like there's no way that, you know, anybody, you would have to be a John Carmack to tell a story in this medium. And there are very, very few John Carmacks out there in terms of being gifted enough developers and surrounded by storytellers too, and being a great storyteller himself to like be an artist, you know, to be a, Nvidia talks about this now in their marketing materials, to be DaVinci and Einstein, you know, together in one person.

• 1:39:00Ben Gilbert?

  Yeah, it reminds me of the people that do like the crazy, cool art in Microsoft Excel by like painting each of the cells a different color. You had to be that type of person to be a game developer in Carmack's era because it was esoteric as hell to be able to actually figure out how to make this hardware do what you want.

• 1:39:19David Rosenthal?

  Another big one I want to highlight, you know, I just keep thinking back, going to the, thinking back to the original time when Nvidia was funded. I wonder what like, if they're really honest with themselves, like what Sequoia and Don Valentine would think about that.

• 1:39:36David Rosenthal?

  They made the wrong venture bet, like in a, in a market like that, we see it all the time. Like, look at Web three right now. If there's a team making some new vision for a class of applications in Web three, like they're going to get term sheets from everybody and then there's going to be a million copycats the next day.

• 1:39:55Ben Gilbert?

  It is the beauty of proliferation and then consolidation. I mean, Buffett has, I think it's in a 2000 Fortune article that he wrote. It's weird that I know that, but I think that's right. In an op ed about how there were, whatever it was, 70 car companies before we narrowed it all the way down to Ford, GM and Chrysler. And the airlines were sort of the same way. There's this proliferation, there's massive, there's no one can really differentiate, no one can build any power. And so you only have a few survivors left. And in general, they compete on pretty low margins when there's only a few left and their defensibility comes from their scale. You know, I think open question, if that's sort of how the graphics market necessarily matured, but you're absolutely right to like, sort of self reflect on the time when Sequoia and Sutter Hill invested to say,

• 1:40:42Ben Gilbert?

  Would you make that type of bet again? You backed one of the two winning horses out of 90. Should you do that and just say, well, we're betting on amazing founders? Or should you?

• 1:40:56David Rosenthal?

  Well, I think that's so this is the nuance. I think what is so cool and probably, you know, the fun of the art and the science of sort of what we do. The company they backed was wrong. And yet it became, I don't know how long Sequoia has held. I mean, I think a lot of the GPs at Sequoia and certainly Mark Stevens, who was one of my professors at GSB, who was on the board for Sequoia is still on the board, have held their shares personally for like to this day. Like, that's one of the best venture investment returns of all time, full stop, period.

• 1:41:28Ben Gilbert?

  Anything going from a $6 million valuation to the eighth largest company in the world definitionally has to be one of the best of all time.

• 1:41:35David Rosenthal?

  Right? And so like, they were wrong intellectually, and yet they were right. Right? And like, why were they right? Like, they were right because frankly, of Jensen.

• 1:41:47Ben Gilbert?

  It was a reasonable enough market. The question is, what are you better off doing what they did and investing at the proliferation phase on someone you believe is going to figure it out and have a good shot at being one of the winners? Or should you wait until consolidation and just pay that much higher price in order to back one of the ones that are already running away with the market?

• 1:42:08David Rosenthal?

  Well, and back then in the day, there was no option, right? There was no.

• 1:42:12Ben Gilbert?

  There were no stages of venture capital. There was you raise your venture capital and then hopefully you're profitable enough to go public.

• 1:42:18David Rosenthal?

  They did raise some more money in between that initial $2 million and going public. I think they raised 20 million in total, but like, there wasn't a lot of window. And I think it was Sequoia and Sutter Hill that put that capital in for the rest of that 20 million. But it's really interesting to think about these cases. Take Sequoia and Sutter Hill too, you know, and specifically like they've gotten it right so many times, but it's not a straight line. So like, what's the lesson from that?

• 1:42:44Ben Gilbert?

  Yeah. And the magic was that Jensen really figured it out early that they were in a business that was totally at the mercy of Moore's Law. And so like in having that initial realization as early as they did with the proliferation of competitors and everyone doing, you know, the triangles and direct text and all that, that taught them the lesson early enough that, oh, we are in a business where we must be reinventing. There is no way to stay ahead other than ruthless self-examination and completely upending and re-betting the business.

• 1:43:20David Rosenthal?

  Yep. Ship faster and reinvent. Yep.

• 1:43:24Ben Gilbert?

  Yeah. So that, I mean, that, to me, is why they, why they survived.

• 1:43:29David Rosenthal?

  If you think about the class of companies that are like the greatest venture returns of all time, some of them are like Nvidia where like you look at the team, you look at the business plan, the thesis originally, and like, yeah, it wasn't a straight line, but it worked out. But then some of them are, you know, Sequoia even used to talk about this on their website, the misfits, the ones that look like unfundable.

• 1:43:57Ben Gilbert?

  Steve Jobs smelling bad, you know, that sort of.

• 1:44:00David Rosenthal?

  Right.

• 1:44:01Ben Gilbert?

  Yeah.

• 1:44:02David Rosenthal?

  So it's like, and I think, you know, plenty of venture firms, but I have to hand it to Sequoia over history too. Like they've done a really good job of doing both of these. They do the Steve Jobs and they do the Jensen's. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:44:21Ben Gilbert?

  Yes. There is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:44:32David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:44:52Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system. So teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:45:05David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:45:16Ben Gilbert?

  All right, David. So what is the company that they invested in?

• 1:45:19David Rosenthal?

  Ben, you are talking about Keyhole.

• 1:45:22Ben Gilbert?

  Yes, I thought you would know. So I love this little foreshadow before we get to grading, because I think it's so interesting that Jensen basically saw the potential of Keyhole. And without sharing what Keyhole became, I think astute listeners will know.

• 1:45:35David Rosenthal?

  We've talked about it on Acquired.

• 1:45:37Ben Gilbert?

  And we have, we've done an episode.

• 1:45:38David Rosenthal?

  A whole episode on it.

• 1:45:40Ben Gilbert?

  Basically, this company that can't raise any money from anyone else comes and pitches Jensen. And he's like, oh, my God, I see this. This is the future. This is simulation. Like, you are creating a model of the Earth in software, and people can just navigate around the Earth. And so now that I've given it away.

• 1:45:57David Rosenthal?

  A graphical model of the Earth.

• 1:46:00Ben Gilbert?

  Yes, Google acquired it. It became Google Earth. And Nvidia was one of the early investors. And that really goes to speak to like where Jensen and the leadership team at Nvidia sort of saw their business going from this point forward, where it was all about simulation. It was all about using massively parallel computing to build brand new experiences, to enable research, to enable... I don't think there was any machine learning going on. I think it was all sort of like the graphical use of the chip. But this sort of like gets into the omniverse stuff that they're doing now. And one of the main reasons that I think they invested was because he wanted it to stay alive so they could keep demoing it to customers, because it showed off Nvidia technology so well.

• 1:46:45Ben Gilbert?

  But I just love that little tidbit.

• 1:46:47David Rosenthal?

  Yeah, we did our episode. God, it was years ago now, the Google Maps episode. That was such a good one.

• 1:46:52Ben Gilbert?

  Yeah, where to Keyhole and...

• 1:46:55David Rosenthal?

  There were three companies that Google all bought and mashed up in the parlance of the day to ultimately become Google Maps.

• 1:47:04Ben Gilbert?

  Zipdash.

• 1:47:05David Rosenthal?

  Zipdash, yes. And they were all like 20, $30 million acquisitions. Amazing. That's what's so cool about this. And I think maybe this is the like... Where Jensen and the Nvidia story bridge from like the, oh, it was the, you know, obvious investment market to bet on, team to bet on, to go all-star engineers to go build this graphics card. Nobody really could have seen that graphics were going to become a lot more than games. Like, you maybe could have seen it, like, you know, there was SGI and Hollywood and Jurassic Park, and there were some military applications

• 1:47:46David Rosenthal?

  for computer graphics, but very few, even Jensen and Nvidia, they were like, video games are the thing.

• 1:47:53Ben Gilbert?

  Fortunately, that became the biggest entertainment medium. And so even if that was your only market.

• 1:47:57David Rosenthal?

  Keyhole and Google Earth and Google Maps, such a great example of like, computer graphics became so much more important than like, relevant beyond just video games. And that's all a computer, you know, dynamically generated programmable computer graphics that are making all of that, all of that happen. All right. So how are we going to grade this?

• 1:48:17Ben Gilbert?

  Yeah. So I'm thinking, given the opportunity, the market opportunity that existed between 1993 and 2006 for computer graphics, how did Nvidia do at exploiting that market opportunity? And like, share price is a reasonable way to think about it. I think it's a second order metric on like, how were they at creating value and capturing value? And I'd say like, their value creation was amazing. Their value capture.

• 1:48:49David Rosenthal?

  Yeah.

• 1:48:51Ben Gilbert?

  They did better than anyone else, as far as I could figure out. The question I was sort of trying to figure out is that there were 90 other competitors doing same-ish thing, two-ish survived. Was there anyone else in the value chain that was able to do a much better job capturing? Like, would you rather have been Microsoft than Nvidia?

• 1:49:12David Rosenthal?

  This leads into the really interesting question to think about for Nvidia in this period. Microsoft did.

• 1:49:20David Rosenthal?

  Basically, nothing. No. Okay, that's like, like, that's not fair to Microsoft.

• 1:49:24Ben Gilbert?

  Sure, there was a large team that did DirectX.

• 1:49:26David Rosenthal?

  Huge team, you know, and the Xbox project was amazing. And like, I don't mean that in any way to throw shade at anybody at Microsoft, but like, they were in this position where they could just sit there. They could watch the market develop for computer graphics and they could be pretty, you know, by making good, very good strategic decisions, they could capture a ton of the value with other companies taking the risks of developing the market, figuring out all this stuff. And then, you know, Microsoft can come along and be like, great, Nvidia, we're going to help save

• 1:50:04David Rosenthal?

  you from Intel. And in return, you're gonna, you know, give us a really sweetheart deal on these chips and you're gonna put us in business with Xbox. And by the way, the other side of your gaming and computer graphics business on PCs, we're going to become your primary partner for that, too. And all of the development languages that you're going to create and CG and all that. Yeah, we're, we're tightly coupled with that and it's all going to work only on Windows.

• 1:50:33Ben Gilbert?

  I think your assessment of Microsoft did basically nothing, except make really good strategic decisions is like reasonable enough for DirectX, but totally is not fair for Xbox.

• 1:50:44David Rosenthal?

  No, it's not fair for Xbox at all. It's not, it's not.

• 1:50:47Ben Gilbert?

  But it is an interesting way of, like, to put it another way, and let's exclude Xbox for a moment. You're basically just recognizing that Microsoft had an unbelievable position in the market and did an amazing capital allocation job exploiting it and basically saying, hey, you know what? You know what we don't need to do? All that crap that like Nvidia and ATI and all those guys are doing. You know how we can still retain our market position and continue printing money the way that we do? This thing. And they did that. And they didn't get into the commodity business and they were brilliant.

• 1:51:20David Rosenthal?

  We don't need to be in this brutally competitive industry where like, if we don't ship six months ahead of our competitors, every cycle, we're toast.

• 1:51:29Ben Gilbert?

  Yeah.

• 1:51:30David Rosenthal?

  So I think, you know, in this kind of like grading question. Ah, man, the longer we do this show, the more I realize this is like a mega theme of acquired that like Microsoft in the 90s, early 2000s was such a power. And the antitrust, you know, the DOJ case really, really crippled it probably for good for the ecosystem.

• 1:51:54Ben Gilbert?

  Then the 3D chess version is, and this kind of foreshadows the next episode. Because Nvidia had to learn these hard lessons and had to develop like was forced to develop these really crazy competencies, like eventually developing CUDA that would power this whole machine learning and scientific computing revolution. Was it bad for Microsoft to not have to grow that DNA in the same way that it was bad for Microsoft to not have to grow the mobile DNA and Apple beat them at that game?

• 1:52:20David Rosenthal?

  Yeah, that's a great point.

• 1:52:22Ben Gilbert?

  I don't know enough yet about how the machine learning market is going to develop or has developed in order to sort of make a call yet on that point. But if you're just standing there in 2006, reflecting back, Nvidia fought for their life and won.

• 1:52:40David Rosenthal?

  Multiple times.

• 1:52:40Ben Gilbert?

  And Microsoft just leveraged the crap out of their amazing position.

• 1:52:45David Rosenthal?

  Yes.

• 1:52:46Ben Gilbert?

  And probably achieved about the same outcome.

• 1:52:49David Rosenthal?

  Yep. Both of these two fighting for their life, company defining moments from Nvidia's first 10 to 15 years, the overcoming the 90 competitors and then the building and making the case that they're not going to get commoditized by Intel, that the GPU is going to be a standalone important thing. Microsoft profited hugely from both of those.

• 1:53:14Ben Gilbert?

  Yep, it's so true. I will say Nvidia doing what they did has been net unbelievably positive for the world. Like I watched the Nvidia GTC conference, the 2021, because the 2022 is about to happen. And just like the review of all the stuff they're involved in is so inarguably good for humanity. We need way less energy to do way more interesting stuff that's good for humans because Nvidia exists. And without doing this first 13 years, they would not have laid the groundwork to be able to do all of that in the future. So that's like one sort of contorted lens to look at it through.

• 1:53:51David Rosenthal?

  I think I give Nvidia for this period of time.

• 1:53:58David Rosenthal?

  An A because they're basically the only company that survived. ATI did for sure, for sure, of course, but in a very different fashion. And they created this whole industry, almost inarguably, created and shepherded this whole industry. But it's not an A plus because Microsoft, well, shoot, there was the DOJ case until the DOJ case.

• 1:54:23Ben Gilbert?

  Yeah, it's true. All right. I like that. Hard to argue with it. Carvouts?

• 1:54:28David Rosenthal?

  Carvouts. I have a fun and very appropriate one for this episode. Elden Ring. Have you heard about this, Ben?

• 1:54:36Ben Gilbert?

  No.

• 1:54:37David Rosenthal?

  You're not a gamer, so you, you need to, we need to like get you into gaming after, you know, doing all these episodes now. It's so fun. It's just like, it's great. So Elden Ring, for people who don't know, is the latest From Software game. And it's on all the platforms, console, PC, et cetera. Lots of people are saying this is probably going to be, is up there with the conversation for greatest game of all time ever made. These are the guys, it's Japanese developer. They made the Dark Souls games, if you've heard of them. They're like, just these legendarily like incredibly hard games, but like the world building is unbelievable. And Elden Ring is the first one to come out on modern platforms.

• 1:55:21David Rosenthal?

  And just like everything about it, the graphics, the scale, the breadth of the world, the story. George R R Martin helped develop the backstory to this, like.

• 1:55:31Ben Gilbert?

  Oh, wow.

• 1:55:31David Rosenthal?

  If you needed another example of how video games have become like the biggest, most ambitious storytelling medium out there, like this is it. I've only just started playing the game because I've been researching Nvidia the whole time.

• 1:55:46Ben Gilbert?

  Yeah.

• 1:55:47David Rosenthal?

  But even just in a few hours playing it, like it's, it's incredible. You're not going to get an experience like this in anything else.

• 1:55:53Ben Gilbert?

  Cool. I have an appropriate one that I didn't realize was going to be appropriate until you shared it earlier, which is I have been getting back into a lifting, like a weightlifting program that I haven't done for like 10 years.

• 1:56:07David Rosenthal?

  Inspired by Jensen.

• 1:56:08Ben Gilbert?

  Called Starting Strength by Mark Ripeto. Yeah, apparently inspired by Jensen and I didn't even realize it. But it's like I reactivated a gym membership and I went back to the gym, you know, started kind of from square one in terms of like doing all the basic barbell lifts. It's just been really like it's a new hobby. It's something I did like 10 years ago and then totally led atrophy. And the way that I love to work out and at least historically have the last five to eight years has been like endurance sports. So, you know, training for a marathon or doing week long bike trips and stuff like that. And it's just very fun to get back into the like, every other day, try and, you know, lift as heavy as you possibly can for a few reps, rest for a long time,

• 1:56:51Ben Gilbert?

  you know, make sure you get all your sleep. It's a very different mentality. And so it's been fun doing that again.

• 1:56:56David Rosenthal?

  I love it. It's like, I feel like we're both becoming like better versions of our high school selves. I'm like a like a full on like gamer again, and you're getting back into weightlifting.

• 1:57:06Ben Gilbert?

  High school me would have been like, what? Why would I work out? That doesn't sound fun.

• 1:57:12David Rosenthal?

  Okay, college you, college you.

• 1:57:14Ben Gilbert?

  Fair. All right, listeners, that's all we've got. We are very excited to at some point, come back and talk to you about 2007 through 2022 with Nvidia and the absolutely unfathomable things that they have done. Imagine if you started a business in the early 90s, doing a thing that seemed like a small market at the time, but you, you did the thing. And then it turns out that that gave you line of sight to something that the same technology was uniquely able to do.

• 1:57:45Ben Gilbert?

  That was like 10 times bigger than the original thing and no one else was even close to you because you had like 18 years of like building stuff and learning about these technologies to be the best company in the world to take advantage of that next thing, which obviously is machine learning. It is just like an oh my God story. And then you layer on top of that, the fact that gaming actually was like 10 to 100 times bigger than anybody ever thought it would be. It's like a literally unbelievable story, except that it happened. So you have to believe it.

• 1:58:15David Rosenthal?

  Ah, so great. This is, this is the kind of stuff that like we do acquired for. I just like been so jazzed about this.

• 1:58:22Ben Gilbert?

  Yeah, I got a lot of research to do on parallel processing and like why this was so perfect for all the machine learning and cryptography use cases. But that's why we get some time between episodes to go and do more research and to watch GTC, the GPU Technology Conference, their annual developer conference 2022. So thank you so much for listening to us. Leave us a review on Apple Podcasts if you listen there or with the new Spotify ratings feature on their mobile app. Share it with a friend if you liked it. We welcome lots of feedback and fortunately in having a part two, we're going to be able to take your feedback and actually work it into the next part of the story. So acquired.fm/Slack, come hang out with us, talk about this, check out the

• 1:59:07Ben Gilbert?

  LP show and we've got a job board. If you are looking for the next stage of your career, we have curated all of the positions at acquired.fm/jobs. And with that, thank you to Vanta, Vouch and the SoftBank Latin America Fund and we will see you next time.

• 1:59:23David Rosenthal?

  We will see you next time, indeed.