Little wonder, then, that every chip design firm wants to be the next Nvidia. The AI chip behemoth’s gross profit margins are a mouthwatering 75%, far better than software giant Microsoft’s 68%. In comparison, the average listed software-as-a-service (SaaS) — or enterprise software — firm has gross margins of under 75%. Indeed, Nvidia’s profits are so huge that any competitor that chips away at some of its market share would do just fine.
There is an awful lot of Nvidia envy these days. That is understandable since the chip behemoth, with a market value of around US$4.62 trillion ($5.98 trillion), rose from its humble gaming chip design origins to become the world’s largest company providing chips, systems and software to power the ongoing boom in artificial intelligence. Legend has it that co-founders Jensen Huang, Chris Malachowsky and Curtis Priem stumbled on the firm’s name when they discovered their first choice, NVision, was trademarked by another firm. So, the trio went with “Envidia” — Latin for “envy”— because they wanted their products to make competitors green with envy. That morphed into the more catchy Nvidia.
The pioneering designer of graphics processing units (GPUs) used for accelerated computing or AI workloads such as training large language models has come a long way. Nvidia shares are up 37% this year, about 1,020% since AI start-up OpenAI unveiled its AI chatbot ChatGPT in November 2022, and 95,000% since August 2010.
