Nvidia’s first product, the NV1, came out in May 1995. It handled 3D graphics, video and sound, and it was aimed mainly at game consoles. According to the company’s 1999 prospectus, it was built “in the absence of industry standards,” in the hope that Nvidia’s own technology would become the standard.
It didn’t. By the end of 1996, the prospectus says, the PC industry had broadly adopted Microsoft’s Direct3D and SGI’s OpenGL, and NV1 revenue fell away.
Nvidia also had a contract with Sega to build a game console. Jensen Huang, its chief executive, told the story to graduates of National Taiwan University in 2023. Nvidia had invented “an unconventional 3D approach,” and Sega’s money was funding the company. “After one year of development, we realized our architecture was the wrong strategy,” he said. Microsoft was about to announce Direct3D, built on a different approach, and many companies were already making chips for it.
Finishing the console meant inferior technology, cut off from Windows and too far behind to catch up. Walking away meant running out of money. “Either way, we would be out of business.”
So Huang contacted Sega’s chief executive, told him Nvidia’s invention was the wrong approach, and said Sega should find another partner. “But I needed Sega to pay us in whole or Nvidia would be out of business. I was embarrassed to ask.”
Sega’s chief executive agreed. “His understanding and generosity gave us six months to live,” Huang said.
Nvidia stopped work on the NV2, a chip designed for a game console, and started on the RIVA 128, built to work with Direct3D. With one chance left, Huang said in a 2023 interview with the podcast Acquired, the team could not afford the usual cycle of making a chip, finding bugs and making it again. “If we only had six months and you get to tape out just one time, then obviously you’re going to tape out a perfect chip,” he said. Asked how he knew it would be perfect, he answered: “because if it’s not, we’ll be out of business.”
They bought an emulator, a machine that could imitate the chip before it existed, and tested the software on it. Huang remembered sitting in the lab “waiting for Windows to paint,” by his estimate about an hour per frame.
The RIVA 128 shipped in August 1997. Nvidia’s product revenue went from $3.7 million in 1996 to $27.3 million in 1997, and two more chips followed in March and July 1998. That March, the prospectus noted, Intel began shipping its own 3D chip.
In 2011, Richard Rumelt, a management professor at UCLA, used the company to show what a strategy is made of. In his account, Nvidia’s diagnosis was blunt: “We are losing the performance race.” The answer was to release a faster chip every six months, three times the industry’s usual pace, with three development teams on overlapping schedules, heavy investment in simulation and emulation, and, over time, control of the driver software that had been in the hands of the board makers.