The $1 Trillion Company That Started at Denny’s

The origin story of the world’s most valuable chip maker begins 30 years ago, when three engineers found themselves meeting in a Silicon Valley diner, brainstorming ideas about computing and dreaming up the company that would change their lives over Grand Slam breakfasts.

“We were not good customers," Nvidia co-founder Chris Malachowsky told me this week. “We were going to show up for four hours and drink 10 cups of coffee."

They were such bad customers that they were kicked out of their booth and moved to a room in the back of the restaurant. There were two groups of people using this area of Denny’s as a co-working space: the founders of Nvidia and the police of San Jose, Calif. “All the cops are writing their reports," Malachowsky said. “We’re sitting there with our laptops, trying to figure out whatever we’re doing."

Whatever they were doing turned out to be starting a company that would crack $1 trillion in value this week.

Since the very beginning of Nvidia, the company has placed early bets on markets that barely existed at the time, from PC gaming to AI computing. Jensen Huang, Nvidia’s co-founder and chief executive, calls them “$0 billion markets." And every $1 trillion business starts in a $0 billion market. The richest companies on earth have always been able to look around corners and imagine the future that nobody else can see, as the most lucrative opportunities in any industry are the ones that never seemed like they could be worth so much.

That’s the history of Nvidia. It isn’t a household name like Apple, Microsoft, Alphabet, Amazon, Meta or Tesla. It is a name that looks like someone fell asleep on a keyboard. But its semiconductors are the invisible, indispensable engines that power the most tantalizing corners of the economy. And the advanced graphics chips known as GPUs required for artificial intelligence are made almost exclusively by Nvidia, as if miners during the gold rush depended on a single company for their supply of picks and shovels.

Nvidia’s essential role in the AI boom is the reason its market cap has nearly tripled in 2023 and the company gained $184 billion last week in one day of wild trading alone. $184 billion! Nvidia grew in a few hours by an entire Netflix. It is worth more than many of its rivals combined after its blowout earnings had investors feeling exuberant and Wall Street analysts sounding like overexcited teens. “Just WOW," one wrote.

To understand how Nvidia became the latest, unlikeliest member of the $1 trillion club this week, it’s worth flashing back to a shabby diner with red booths, neon lights and bullet holes in the windows.

The early days of any company can reveal a great deal about its culture for the rest of its existence—and the organizational philosophy forged between gulps of diner coffee helps explain Nvidia’s success to this day.

I spoke with Malachowsky not long after Nvidia’s market cap broke the trillion-dollar threshold for the first time. He said there were many ways to trace what’s happening now to what happened back then. “One is that we discussed who we wanted to be," he said.

They wanted to create a better chip and build a new kind of business around it. Malachowsky was responsible for hardware design. Curtis Priem took software architecture. Huang was in charge of the business decisions. As they picked at their eggs, he conducted market research in Denny’s, studying the competition, the price of silicon and their unnamed company’s potential margins. “Jensen refused to join the startup unless it could make $50 million in sales in a year," Priem said. (He made the right choice: Nvidia’s revenues last year were $27 billion.)

Before it was the birthplace of his company, Denny’s was important to Huang, who has been running Nvidia since Mark Zuckerberg was in elementary school. He wasn’t always a slick public speaker in his signature black leather jacket. In fact, Huang says he wouldn’t be the leader he is today if not for one job: waiting tables at a Denny’s.

It was a formative experience. Huang was a shy teenager, but taking pancake orders taught him how to communicate with strangers and compromise in tense situations beyond his control. He also learned from one of his regulars that he should add mayo and mustard to a turkey sandwich called the Super Bird, which remains his favorite item on the menu.

Huang, Malachowsky and Priem had known each other for years before they combined their complementary talents and went into business together. Priem and Malachowsky were engineers at Sun Microsystems, while Huang worked for LSI Logic, but they couldn’t meet in their offices while they plotted ways to leave their jobs. “Neutral territory was this Denny’s," Priem said.

They met several times in 1992 and 1993 to discuss the specialized chips that would bring more realistic, 3-D graphics to gaming. It’s where they cooked up the company, but they moved before it was officially Nvidia. They realized that a diner by the highway wasn’t the ideal office when they noticed the bullet holes in the front window. “Maybe this isn’t the safest place to hang out for hours and hours," Malachhowsky said by video-chat as he sipped from a coffee mug.

They had more privacy when they relocated to Priem’s townhouse. What they didn’t have was air conditioning. Or a name.

“It shouldn’t be a real word and shouldn’t say what we’re gonna do," Huang told Malachowsky. “We’re three guys sitting in an un-air-conditioned condo. Who knows what we’re gonna end up doing?"

The one thing they did know was that they wanted to be in the business of chips. At the time, graphics cards were known by two letters, and Priem liked the sound of “NV." Envy. They called their startup Nvision, which wasn’t a real word and didn’t hint at what they would do. It was perfect. Priem walked to the answering machine in his kitchen to record a greeting from Nvision’s global headquarters. The only problem was that several companies already had similar names, including one that made environmentally friendly toilet paper. Priem reached for his Latin dictionary and found the word for envy. Invidia. He dropped the first letter and taped a new message on his answering machine.

There were many people they struggled to convince of Nvidia’s vision in the early years—including Huang’s own mother. He still remembers the advice she gave him when he announced that he was going to start a company with his friends to make chips that people would use to play games.

“Why don’t you go get a job?" she said.

The entrepreneurs nearly had their lunch eaten several times over the next three decades. Nvidia risked bankruptcy right before it released the graphics processing unit that would save the company in 1997. In 2007, when it rolled out a new platform for accelerated computing, the system was ahead of its time and the company’s profits took a hit. During the 2008 financial crisis, Nvidia’s value soon fell below $5 billion.

But the bet paid off in the long run. Huang’s personal fortune grew by $6 billion in one day last week because he stuck to his company’s strategy in those leaner years.

The audacious decision to invest in AI computing before they knew chatbots would be trained on thousands of Nvidia’s expensive chips had something in common with Huang, Malachowsky and Priem quitting their jobs to start a company.

It seems obvious now, but it wasn’t then. When I asked about the GPU market in those days, Malachowsky told me: “There was none." It was one of Huang’s magical $0 billion markets—the same language he used to describe AI when he gave an exquisitely timed commencement speech last week.

He didn’t mention Denny’s. But it was hard not to think about Super Bird sandwiches with mayo and mustard when he told the college graduates to remember one thing as they get jobs, start companies and look for $0 billion markets of their own.

“Either you’re running for food," he said, “or you’re running from becoming food."