NVIDIA Explained; Simply

Nvidia is a name that’s been all over the news recently. It’s one of the world’s most valuable companies (Source: The Washington Post) and is strongly tied to artificial intelligence. There are a lot of conversations, especially around Nvidia’s stock, as some people win big and others lose hard on its heavy fluctuations. 

But with so much excitement surrounding this company, it’s difficult to parse what they actually do. Why is this company so highly valued? What value do they provide that other companies don’t? What do you need to know about Nvidia? 

This post will cover what Nvidia does, what its products are used for, and why the company is so big right now. Nothing in this post should be mistaken for investment advice; we at OneLaunch are not financial advisers, nor are we qualified to give advice. Consult with a licensed, educated and trusted financial adviser before making any investments.

What Does NVIDIA Do?

Nvidia is a tech company known for creating advanced graphics processing units (GPUs) and application programming interfaces (APIs). They create both hardware and software that’s used in laptops, desktops, data centers, and, most recently, artificial intelligence. 

Nvidia started out designing graphics processing units for computers that would bring advanced 3D graphics to life in video games. They were almost entirely a direct-to-consumer company, creating cards that lived inside high-end computers used for editing, creating 3D motion graphics, and playing video games. A large part of their initial success was their graphics cards that enabled game developers to create games that looked closer and closer to real life. Creating life-like graphics requires a lot of processing power from a computer, which in return will use up a lot of the computer’s resources. 

Today, these graphics cards are sold under the name “GeForce” and are fairly expensive (prices: 

• GeForce RTX 3060 — $299.99
• GeForce RTX4070 — $569.99
• PNY GeForce RTX 4080 Super — $959

Microprocessors are small circuits that can handle a lot of processing power for their size. At a high level, this is linked to how many transistors a microprocessor can have. Microprocessors are created from simple materials like silicon, quartz, and additional metals and chemicals, but the process of manufacturing them is very difficult and expensive. Nvidia is the company that designs the microprocessors and then outsources most of their manufacturing to the Taiwan Semiconductor Manufacturing Company.

Of course, a high-end graphics card can perform a lot of functions very efficiently, resulting in prettier, more lifelike games being created. This is all well and good, but not the reason it’s one of the highest-valued companies today. 

What is NVIDIA Used For?

While Nvidia products are still used for video games, they’ve been branching out in the past decade or so into other industries. Nvidia was once at the center of cryptocurrencies like Bitcoin and Ethereum. This is because the Bitcoin and Ethereum networks provided monetary incentives for people and companies to help solve complex crypto graphics that were essential to creating digital currency. People operated the network with Nvidia GPUs, which once again could solve numerous complex problems at the same time.  

People would “mine” coins themselves with high volumes of Nvidia GPUs, resulting in GPU scarcity, price scalping, and a lot of power being wasted on Bitcoin mining. Most cryptocurrencies have moved away from this method of cryptocurrency acquisition and, today, it’s not what Nvidia is used for. 

What they’re most known for today is artificial intelligence solutions. We’ve talked about how artificial intelligence, or AI, is being used in everyday life. AI is everywhere now, and Nvidia is vital to it working. Artificial intelligence needs powerful microprocessors that can handle a lot of different operations at the same time. Sound familiar? 

Nvidia’s research into small processors that can handle a lot of complex solutions was perfectly suited for them. Large companies like Microsoft and Meta alone spend $9 billion on generative AI products, according to Quartz. They were primarily purchasing H100 GPUs, a GPU meant for a data center that can process information for artificial intelligence incredibly efficiently. A single one of these GPUs costs $30,000.

Nvidia products are still used for consumer products, but today, 78% of their revenue comes from data center processing for analytics and AI, according to Visual Capitalist. Only 17.1% of their revenue is for GPUs for computers. 

Why is NVIDIA So Popular Right Now?

Nvidia is absolutely essential to artificial intelligence because of how AI works. When you ask ChatGPT a question or ask it to generate an image for you, it compares the question to other similar questions it’s been asked in the past. It also compares the answer to that question to other answers it’s given in the past. Then, it comes up with hundreds, sometimes thousands, of wrong answers and compares them to find the best possible answers. All of this within a fraction of a second. 

Perhaps it’s already easy to see why GPUs are needed for AI. Nvidia, in particular, has invested a lot of research into creating more efficient GPUs for computers. Creating advanced 3D graphics requires advanced processing and energy efficiency, which is also exactly what AI needs. 

Nvidia has a 20+ year lead on other companies that would want to enter the AI microprocessor space. Additionally, Nvidia owns a lot of other companies that previously produced GPUs. Because AI is the latest tech hype, and almost no one can offer the same solutions Nvidia can, Nvidia is one of the most valuable companies in the world. 

Should I Invest in NVIDIA

With how volatile Nvidia’s stock price has been in the past year, many people find out about the company because of the promise of profits in the long run. There are a lot of complex issues surrounding the value of Nvidia. For example, Nvidia relies on manufacturing its microprocessors overseas, so trade restrictions can impact Nvidia’s value. 

Additionally, Nvidia relies on the hype and success of artificial intelligence. New advances in artificial intelligence will have an impact on Nvidia. When this happens, Nvidia may not be the only stock to jump in value, according to Schwab. 

Before you invest, we recommend being informed not only about Nvidia as a company but also the greater AI climate. Read about AI products that drive the growth of Nvidia and look at the historical data of Nvidia’s stock price to make an informed decision about investing in Nvidia.

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