Business model of Nvidia

Category	Details
How Nvidia Started	Founded April 5, 1993, by Jensen Huang (age 30), Chris Malachowsky, and Curtis Priem at a Denny’s diner in East San Jose. Started with $200 cash and secured $20 million venture capital to build GPUs for gaming. Nearly failed in 1996 with “technically poor” chips but survived by securing contract buyout from Sega.
Present Condition	First company to surpass $5 trillion market capitalization (October 29, 2025). Maintains 86% market share in AI GPU segment for 2025. Generated $131 billion revenue in fiscal 2024, with $116.2 billion from compute and networking (AI/data center) segment.
Future of Company & Industry	AI chip market projected to reach $164 billion by 2029 (41.6% CAGR). Faces growing competition as customers like Google, Amazon, Microsoft develop custom chips—expected to capture 45% of AI chip market by 2028. Nvidia commits to annual chip architecture releases (versus previous two-year cycles) to maintain dominance.
Opportunities for Young Entrepreneurs	AI chip design startups, AI software ecosystem development (competing with CUDA platform), specialized inference chips (lower cost alternatives), edge AI solutions for IoT/automotive, AI chip packaging and thermal management solutions, AI workload optimization software.
Market Share of Nvidia	80-86% share of AI GPU market in 2025. Nearly 90% market share in AI chip design. Customer concentration risk: top 2 customers = 39% of sales; top 6 = 85% of sales. Primary customers likely include Microsoft, Amazon, Google, Meta, OpenAI, Oracle.
MOAT (Competitive Advantage)	CUDA software ecosystem (launched 2006)—proprietary platform with massive developer network creating switching costs. Vertical integration of hardware-software-networking. First-mover advantage in AI training chips with established supply relationships (TSMC manufacturing). Network effects—large customer base attracts more developers, strengthening platform value. Annual innovation cycle maintaining technological lead.
How Nvidia Makes Money	88% revenue from compute and networking (AI chips for data centers). Data centers now constitute 90% of revenue (2024) versus diversified mix in 2020. Sells GPUs to cloud providers (Amazon, Google, Microsoft = 50% of data center revenue), AI companies, enterprises. Flagship AI chips cost approximately $30,000+ each; 78% gross margin. Secondary revenue: gaming GPUs (17%), professional visualization, automotive AI, IP licensing. Fabless model—designs chips but outsources manufacturing to TSMC, reducing capital expenditure.