It must be every vendor’s fantasy to become larger than their largest customers.
But do suppliers ever outshine the ones they supply?
Almost by definition the biggest companies are famous because they’re the ones selling an end product known to millions of consumers and businesses. The four $1 trillion companies by market share in the U.S. are tech companies with household names: Apple, Microsoft, Amazon, and Google’s parent Alphabet.
Now comes Nvidia, the first supplier to touch the $1 trillion market share level.
Nvidia is a semiconductor company whose chips can be found powering artificial intelligence programs. “Nvidia isn’t a household name,” The Wall Street Journal notes. “It doesn’t produce consumer devices or internet services that the world’s masses use daily. Behind the scenes, though, its chips have become indispensable. They are used in PCs, cars, and robots. Now with AI, its processors drive new chatbots … and a raft of other tools that the world’s biggest companies are racing to deploy.”
The company first gained success making graphics processors for video games, then expanded into a form of complex computing adept at AI. When AI went mainstream, Nvidia’s stock price soared. The company touched a $1 trillion valuation in late May.
Nvidia isn’t a manufacturer. It designs chips and then outsources fabrication. That complicates the definition of Nvidia as a supplier (maybe it’s a design house rather than a vendor?). But I’d say Nvidia is a supplier. Often within the complex world of chip production, companies collaborate. No one goes it alone. ASML, the Dutch company that makes the most sophisticated fabricators for chip plants, works with several thousand suppliers.
What is the impact of Nvidia’s achievement? I see it as a leading indicator of the changing face of business as technology advances. Innovations significant enough to impact society (electric vehicles, AI, etc.) require specialized support from talented partners. Expect more suppliers to get noticed.
The Economist identified numerous suppliers and partners that will benefit from the growth of AI and could join Nvidia as smart investments. Among them: Companies that make switches and routers, and those that build servers for cloud providers.
Suppliers once existed in the background. Now they’re cool. And one is worth a cool trillion.
This article first appeared in Issue 36 of ChainMail here.