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In the history of business success stories, the astonishing rise of NVIDIA to overtake Microsoft as the world’s most valuable company is one that few expected to make history. Last week, the company co-founded by Jensen Huang skyrocketed to a market cap of $3.42 trillion, narrowly surpassing Microsoft. But the outcome could have been different. As business leaders marvel at NVIDIA’s rise, it’s worth remembering that another company, Intel, came very close to where NVIDIA is today.
Instead, Intel is making a valiant effort to regain its status as the world’s leading advanced chipmaker, a status that was lost in part through recent articles. luck Case Study.
Detail is According to the piece, the pivotal moment came in the mid-2000s, when then-Intel CEO Paul Otellini told Steve Jobs something few had heard before: “No.”
In 2006, Intel, the global computer chip king, was monopolizing the most in-demand types of chips for personal computers and data centers, and was generating record sales and profits. So Jobs wanted Intel to make a different kind of chip for a product that didn’t even exist at the time: the iPhone.
Otellini knew that chips for phones and tablets would be the next big thing, but Intel would need to pour a lot of capital and top talent into the hugely profitable businesses it already owned. Plus, “nobody knew what the iPhone was going to be,” he said. Atlantic Seven years later, shortly before he stepped down as CEO, he said, “There were chips they were interested in, and they said they didn’t want to pay above a certain price, but that price was below our projected cost. I just couldn’t see it.”
Otellini, who died in 2017, was by many measures an incredibly successful CEO. But Intel could have become the chip giant of the post-PC era if its decisions had played out the other way. Instead, after losing billions of dollars trying to become a significant player, it abandoned its mobile phone chip business in 2016. As he left the company, Otellini seemed to understand the importance of his decision: “If we had done that, the world would have been very different.”
Meanwhile, about 800 miles north in Seattle, Microsoft was struggling to find its role in a technology world dominated by the Internet, mobile devices, social media, and search. Investors were unimpressed with the company’s efforts. Few could have predicted that a few key decisions would make the company an AI powerhouse a few years later and send its stock price soaring.
Not that long ago, Microsoft and Intel were at the pinnacle of the technology world. They were neither competitors nor important customers, but what New York University’s Adam Brandenburger and Yale’s Barry Neilbuff considered “complements.” For many years, Microsoft built its hugely profitable Windows operating system to run on computers with Intel chips, and Intel designed new chips to run Windows on (hence “Wintel”). This system powered the personal computer, the flagship technology product of the 1990s. Microsoft’s Bill Gates had become a celebrity billionaire, and Intel’s CEO Andy Grove timeHe was named Man of the Year in 1997.
Ignoring Steve Jobs wasn’t the only reason for Intel’s decline, but it was a significant one. Intel also tried and failed to develop GPUs (graphics processing units), the type of chips that would later be used in AI development, designed by Nvidia. What if Intel had succeeded? In 2000, Intel was the sixth most valuable company in the world and the largest semiconductor manufacturer, but today it is the 69th largest by value and the second largest semiconductor manufacturer by revenue, far behind number one TSMC (and in some years even lagging behind Samsung).
Fortune 500 CEOs make thousands of decisions in their careers, some of which are crucial. What is easy to explain in hindsight — Microsoft being at the forefront of AI, Google becoming a giant, and Blockbuster being forgotten — was never preordained. Fateful decisions are often only identifiable in retrospect. Nowhere is this more vividly illustrated than in the parallel stories of Microsoft and Intel, and how the latter’s failure paved the way for Nvidia’s phenomenal rise. Studying the case studies of what worked and what didn’t for these giants provides a master class in business strategy not only for today’s pioneers, such as Nvidia, Google, Open AI, and Amazon, but also for Fortune 500 leaders hoping to survive and thrive in the next decade.
Read the full case study here.
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