Huang Renxun sits firmly on the AI Iron Throne
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Text | “Chinese Entrepreneur” reporter Zhao Dongshan
Editor｜Li Wei
He started his business at the age of 30, and the 60-year-old AI godfather, Huang Renxun, is waiting for his highlight moment this year – along with the explosion of AI large models in the world, Nvidia, founded by Huang Renxun, has become the biggest winner because of providing powerful generative AI chips , Huang Renxun’s net worth has also risen.
In the early hours of August 24th, Beijing time, Nvidia announced its latest quarterly financial report as of July 31, 2023, showing that the company’s revenue in the quarter hit a record high of US$13.51 billion, a year-on-year increase of 101%; net profit reached US$6.188 billion, A year-on-year increase of 843%; its gross profit rate also reached an astonishing 70.1%.
Because of the better-than-expected performance of the performance, Nvidia’s stock price rose 3.17% that day to close at US$471.16 per share, and its market value reached a new high of US$1.16 trillion. In the after-hours trading after the financial report was released, Nvidia’s stock price once rose by more than 10%, but it has now fallen back to 6.58%, with the stock price breaking through $500. This means that the market value of Nvidia rose by about 75 billion U.S. dollars (about 545.3 billion yuan) overnight.
In fact, Nvidia’s stock price has more than tripled this year. The real-time ranking of the Bloomberg Billionaires List shows that as of July 4, Huang Renxun’s personal net worth was about 38 billion U.S. dollars, ranking 34th in the world, of which 24.2 billion U.S. dollars was newly added wealth this year, which is the largest increase in wealth this year One of the tech billionaires.
In May 2023, Nvidia had given a revenue forecast of US$11 billion, which shocked the entire Wall Street at that time, and its market value also exceeded one trillion US dollars at that time. Huang Renxun thus became the first Chinese entrepreneur in history with a market capitalization of one trillion dollars, and Nvidia also became the first trillion-dollar chip company in history.
Facts have proved that Huang Renxun’s revenue forecast is by no means a lie, and Nvidia’s actual performance is even much higher than expected. In addition, Nvidia also created a milestone moment in the chip industry – Nvidia’s quarterly revenue exceeded Intel’s $12.9 billion for the first time, which represented the victory of fabless chip design companies over IDM (vertical integration model) giants.
“A new era of computing has begun. Companies around the world are transforming from general-purpose computing to accelerated computing and generative AI.” Huang Renxun said.
Huang Renxun’s confidence lies in the fact that under the global AI large-scale model arms race, the demand for underlying computing power has skyrocketed. Huang Renxun and Nvidia, who have mastered computing power, as computing power providers, have become the biggest winners in this wave of AI large-scale models. And the exceeding-expected performance in the new quarter once again allowed Huang Renxun to take the lead and secure the Iron Throne of AI.
Crazy Financial Report
Looking at the bleak global capital market, Nvidia is one of the few that shines.
Among Nvidia’s US$13.51 billion in revenue in the second quarter, the data center and game businesses are the most critical sources of revenue, accounting for about 95% of the combined revenue.
Because of the hot global demand for GPU chips for processing AI computing, Nvidia’s data center business revenue has doubled, far exceeding game revenue, and its revenue ratio has risen to 76%, a growth rate far exceeding the previous quarter, setting a record for a single quarter . The “double growth” of Nvidia’s revenue this quarter was also mainly due to the strong demand for downstream data center business.
Computing power, algorithms, and data constitute the three elements of the AI era. Among them, computing power is an infrastructure like electricity. How many GPU chips and how much computing power are there have become the key to the outside world’s evaluation of the entry threshold for large-scale model development and entrepreneurship. The GPU chip has become the core component of ChatGPT training and deployment because of its performance advantages in graphics computing. Nvidia has almost no competitors in the field of GPU chips.
All this stems from Huang Renxun’s precise judgment and past hard work. As early as OpenAI was just established, Huang Renxun personally handed over the world’s first AI supercomputer DGX to OpenAI. He witnessed the launch of ChatGPT and the innovative iteration of GPT from 3.5 to 4.0. Since then, the competition of global AI companies’ computing power has also become a competition of how many Nvidia GPU chips are available.
According to industry estimates, a ChatGPT needs 10,000 Nvidia A100 chips to run. According to market research firm TrendForce, most of the more than 1.2 million AI servers shipped this year are equipped with Nvidia’s GPU chips, accounting for 60% to 70% of the total.
According to Nvidia CFO Colette Kress in the earnings conference call, the data center’s revenue of 10.32 billion US dollars mainly comes from cloud service providers, as well as Internet technology companies that train and deploy generative AI, and simultaneously drive the HGX server computing platform of the Hopper architecture, data center computing Products increased by 195% year-on-year and 157% month-on-month; the network sector saw an increase of 94% year-on-year and 85% month-on-month growth due to the increased demand for InfiniBand network solutions matching the HGX server computing platform.
In addition, Kress mentioned that as customers shift investment to artificial intelligence and accelerated computing, the US data center has the strongest growth, while demand from China accounts for 20% to 25% of Nvidia’s data center revenue.
When asked by analysts about the U.S. government’s rules requiring Nvidia to limit exports of high-performance AI chips to China, Kress said that given the strong global demand for Nvidia’s products, if the U.S. imposes additional export restrictions on data center GPU chips sold to China, It is not expected to have an immediate material impact on Nvidia’s performance, however, in the long run, such restrictions, if implemented, will cause the US industry to permanently lose the opportunity to compete and lead in one of the world’s largest markets.
In the second quarter, although the game business has grown steadily this quarter, its proportion is still compressed to less than 20% by the rapid growth of data centers. The revenue of the game business was 2.49 billion US dollars, an increase of 22% year-on-year, an increase of 11% month-on-month, and 4.6% higher than analysts’ expected revenue of 2.38 billion US dollars.
Nvidia’s gaming business is mainly for graphics card GPU chips in personal desktop computers, notebook computers and other devices. Demand in the home entertainment and consumer electronics markets has slowed down, and destocking has become the main theme of Nvidia’s gaming business. Nvidia’s total inventory in the second fiscal quarter was US$4.32 billion, and the inventory turnover days were 97 days, a decrease from the first quarter’s US$4.61 billion and 165 days.
In terms of key data center products, Nvidia began to show a situation of “supply in short supply”, which also led to Nvidia’s gross profit margin reaching an astonishing 70.1% this quarter, while Intel’s gross profit margin was 39.8% in the same quarter. Nvidia’s gross profit margin for the third quarter is expected to return to 71.5%.
Legendary Entrepreneurship Story
Huang Renxun’s success did not come overnight. Behind the highlight, Huang Renxun has worked silently for 30 years.
Huang Renxun was admitted to university at the age of 16, entered Stanford with a master’s degree, and founded his own IT company at the age of 30. In the early days of entrepreneurship, Nvidia stumbled all the way and was on the verge of bankruptcy several times. When Huang Renxun was 36 years old, Nvidia went public, but the stock price once fell to only $6. It’s just that, in the 30 years since starting his business, Huang Renxun has never let up for a moment, which has allowed the company to enter the trillion-dollar market capitalization club.
In Huang Renxun’s life dictionary, only four things are very important: work, think, help others and create. Because of the experience of being on the verge of bankruptcy during the entrepreneurial period, until now Huang Renxun often says, “Remember, we are only 30 days away from bankruptcy” to motivate employees to fight.
As early as in college, Huang Renxun aspired to become the global graphics emperor. At the age of 30, he co-founded Nvidia with two engineers. Unlike the chips made by Intel and AMD, Huang Renxun paid more attention to graphics chips that allowed games and images to run smoothly, because at that time personal computers had just entered the home, but entertainment functions were still missing and could not meet the needs of running games.
After starting a business, Huang Renxun launched the NV1 chip. However, NV1 exhausted the company’s early investment due to betting on the wrong technology direction. In order to survive, the company had to shrink from more than 100 people to more than 30 people. The emergence of the Japanese game giant Sega made Huang Renxun see a turning point. The other party put out 7 million US dollars in funds to hope that Nvidia would develop a game console chip, which later became NV2.
“We face our mistakes honestly, seek help humbly, and save Nvidia’s survival. These traits are the hardest to develop for the smartest and most successful people.” Huang Renxun said in a speech at National Taiwan University this year.
It was not until 1997 that Nvidia developed the third-generation product RIVA128 that it really gained a firm foothold. This is the first high-performance 128-bit graphics chip that supports Microsoft’s Direct3D graphics interface, and has won full support from Microsoft. With the development of the video game industry, the market demand for GPU chips is getting higher and higher. It can help the CPU (central processing unit) to share part of the tasks of graphics rendering, video encoding and decoding, and has become an important part of the computer industry.
At the end of 2000, Nvidia acquired its old rival 3dfx for US$110 million. In the same year, Huang Renxun challenged the chip giant Intel. Huang Renxun proposed “Huang’s Law” against the “Moore’s Law” of Intel founder Gordon Moore, that is, Nvidia’s products are upgraded every 6 months, and their functions are doubled. Such a technological update rate is twice as fast as “Moore’s Law”.
At the end of 2006, Huang Renxun realized that high-speed parallel computing can be used for users other than computer graphics, opened GPU to software developers, and launched the CUDA platform, allowing developers to use the computing power provided by NVIDIA for purposes other than graphics. While the results were modest at first, as the age of artificial intelligence dawned, developers quickly realized that GPUs are excellent at supporting the complex calculations of modern AI systems.
But the cost of CUDA was very high. At that time, Nvidia’s profits had suffered a huge blow over the years, and its market value was only maintained at around $1 billion. Years of underwhelming performance have left shareholders skeptical of CUDA and wanting to focus on improving profitability. But Nvidia persevered.
Later, NVIDIA GPU and CUDA programming language have become the basis and standard for AI development and training. This surprised even Huang Renxun. In an exclusive interview with Forbes in 2016, he mentioned that he had expected GPUs to be used in fields other than games, but he never thought about turning to deep learning applications.
When Huang Renxun recalled this past event, he said: “We invented CUDA for AI. This journey has forged our character. Enduring pain and suffering is a necessary pain on the way to pursue our vision.”
Now, Huang Renxun has waited for his time. With his choice and persistence, he explained to the outside world how innovation and insights led him to create a brand new trillion-dollar market.
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