A Tale of Two Titans: Behind NVIDIA’s Ascent to the Summit of American Computing

Amidst a global pandemic and worldwide lockdowns, US tech group NVIDIA’s stock price has made significant strides, propelling the company’s market cap to a staggering $251 billion. This monumental surge in market share has earned NVIDIA the title of most valuable chip maker in America, leaving former industry leader Intel in its shadow. After decades of dominance, a summer of misfortune and miscalculation has led to Intel’s descent from the pinnacle of American computing.

During the dotcom boom of the late ’90s, NVIDIA emerged as a manufacturer of graphics processing units (GPUs) for high-end video gaming systems. Unlike central processing units, which carry out computations in series, GPUs increase efficiency by performing hundreds of intense computations simultaneously, allowing gamers to enjoy high-quality graphics with low latency. By outperforming existing technologies, NVIDIA promptly established itself as a force to be reckoned with in the computing industry. 

Unlike its rival Intel, avoiding the temptation to bask in past glory greatly contributed to NVIDIA’s success over the years. Much of the company’s continued progress has stemmed from its ability to stay relevant by expanding the uses of its technology to cutting edge developments in Silicon Valley. A prime example of this has been the deployment of NVIDIA’s GPUs in the field of artificial intelligence (AI). Training complex machine learning models on large data sets requires extensive amounts of computing power. According to OpenAI, in 2018, the computing costs required to train large AI models had escalated at an alarming rate, doubling every 3.4 months since 2012. Specialized GPUs designed by NVIDIA help to mitigate these technical constraints by carrying out computationally intensive tasks with ease and efficiently processing large sets of data. NVIDIA quickly capitalized on this opportunity by delivering GPUs to individuals and start-ups implementing AI without access to sufficient amounts of processing power.

NVIDIA finds itself on a shortlist of companies that have benefited from the extraordinary measures taken to fight the coronavirus pandemic. As remote working and learning have become necessary worldwide, sales of personal computing services and video games have experienced tremendous growth. This growth was evident in NVIDIA’s first-quarter financial performance, which saw the company record $3.08 billion in revenue, a 39% year-over-year increase. 

NVIDIA’s remarkable growth rate may reach even loftier heights, as the company has expressed interest in the acquisition of SoftBank-owned chip designer Arm Ltd. Arm’s worldwide reach is extensive, with the likes of Apple, Samsung, Qualcomm, and Huawei licensing its architecture to power their smartphone chips; even NVIDIA relies on Arm’s technology for its work in supercomputing and AI. The acquisition of Arm would accelerate NVIDIA’s expansion into the autonomous driving, supercomputing, and machine learning sectors, while further broadening the gap between NVIDIA and its competitors.

While COVID-19 ushered in explosive growth for NVIDIA, the progression of Intel’s summer has followed a different trajectory. Although Intel has not experienced a direct impact by the viral outbreak, the computing giant’s year has not progressed without its share of difficulty. The first of Intel’s troubles came early in 2020, as clients criticized the performance of the company’s new 10 nanometer processors, introduced late in 2019. These concerns were addressed in forthright remarks made by Intel CFO George Davis. In his words, “10 nm just isn’t going to be the best node that Intel has ever made. It’s going to be less productive than 14 nm, less productive than 22 nm.” The pressure only intensified in June, when Apple announced its plans to replace Intel processing units in its Mac computers with its own ARM silicon chips, citing a need for increased efficiency and faster processing speeds. The new in-house technology that Apple will employ in its Macs is based on chip-architecture licensed from Arm Ltd, the same company that NVIDIA has expressed an interest in acquiring. If Apple’s switch to ARM-based technology fulfills its promise of providing “a whole new level of performance”, Intel will have to convince its other clients not to follow suit.

As is often the case in financial markets, the share price of a company sheds minimal light on the future of the underlying business. It would be naive to claim immediately that Intel’s recent struggles are signs of a tech giant’s impending decline. While the last six months have been anything but straightforward for Intel, there are a few reasons to believe that the company’s outlook is far from dismal. Notably, in 2019, Intel recorded $21 billion in net income, 40% greater than its three closest competitors (NVIDIA, Advanced Micro Devices, and TSMC) combined. Additionally, despite dropping Intel processing units from its Macs, Apple will continue to rely on Intel’s technology to power its cloud computing services. Lastly, Intel has shifted its attention to developing more efficient 7 nm and 5 nm processors, with the distribution of 7 nm processors expected to begin in late 2022, one year later than its initial plan. Intel CFO George Davis commented on the transition to a smaller processor, saying: “We’re excited about the improvements that we’re seeing, and we expect to start the 7 nanometer period with a much better profile of performance over that [of the 10 nm] starting at the end of 2021.” Regardless of its prospective plans, Intel’s upcoming challenges imply a long road ahead. While its grandiose financial figures in 2019 reflect the company’s size and maturity, roughly half of its revenue is derived from its chip-making operations for clients. In light of its recent struggles with Apple, and the rapid growth of its three nearest competitors in the chip-manufacturing space, Intel is left with the task of protecting almost 50% of its revenue base. Without a doubt, Intel faces an uphill battle to compete with NVIDIA’s accelerating advancement. Already employing a 7 nm architecture, NVIDIA’s next-generation GPU’s are breaking records in machine learning. Furthermore, with its progressing discussions to acquire Arm Ltd, NVIDIA appears poised to continue on its soaring trajectory.

What the future holds is, at best, uncertain. Whether Intel’s recent struggles act as temporary setbacks to be conquered in due time, or whether they signal the end of the company’s dominant era in Silicon Valley, remains unclear. Nevertheless, NVIDIA’s demonstrated ability to meet fluctuating industry demands with the diverse applications of its products can only be an asset in times of uncertainty. As for the rest of us, it is crucial that we take notice, as NVIDIA’s ascent to the height of American computing reveals much about the new rules of survival in a post-pandemic world.