Nvidia today is the world’s most valuable company with a market cap of more than $4 trillion, thanks in large part to the AI boom of the past few years. But Nvidia’s success was far from guaranteed.
CEO and co-founder Jensen Huang recalled recently how a $5 million gift following a failed business deal with Sega gave the company the lifeline it needed at the time, allowing the fledgling company to stay in business and eventually become what it is today.
Appearing on the Joe Rogan Experience podcast, Huang talked about how, back in the 1990s, he and his two co-founders were trying to drum up business for their start-up PC company. They traveled to Japan and pitched Sega management on the idea that Nvidia could build the company’s Dreamcast console.
Nvidia wasn’t able to get it done, however, discovering that it didn’t have the technical ability to give Sega what it needed (Sega would end up partnering with VideoLogic for the Dreamcast). However, Huang still wanted the last $5 million that Sega was due to pay Nvidia for its work on the contract. He told Sega management that Sega could give Nvidia the money as an investment, but Huang frankly admitted that “it is most likely to be lost” given Nvidia’s lack of business opportunities.
At the same time, if Sega didn’t give Nvidia the money, Nvidia would go out of business, Huang said. The Sega management team informed Huang that, even with the $5 million investment, Nvidia would likely still go out of business. “It was completely true,” Huang said.
But a top Sega boss apparently took a liking to Huang and decided to give him the money as an investment because “Jensen was a young man [the CEO] liked. That’s it.” Huang said there was about a 0% chance that Nvidia would be able to return Sega the money.
Nvidia took that money and used it to help build and grow its business in the world of video games, and when Nvidia went public in 1999 at a valuation of $300 million, Sega cashed out. “If he would have kept that $5 million investment, I think it would be worth probably about $1 trillion today,” Huang said.
Nvidia continues to be a big player in the gaming space with its GPUs and it runs the GeForce Now cloud-gaming platform. How Nvidia makes its money today derives more from sales to AI companies.