Jensen Huang’s resignation from Nvidia worries the world of AI start-ups
For years, Jensen Huang has been a frequent attendee at startup events in Silicon Valley, networking with founders, judging pitch competitions and showing up to “demo” days.
Nvidia’s CEO has become a godlike figure in the startup ecosystem, and not just because the industry adored him as one of the world’s most successful entrepreneurs. Mr. Huang, 63, has also made it his mission to help start-ups compete against the biggest and most powerful technology companies in the industry, providing them with funding and computing power.
“As many good ideas as we have, you don’t have all the good ideas in the world,” he said he said on the Acquired podcast in 2023.
So Mr Huang’s sudden departure from Nvidia on Thursday has investors and start-up founders nervous about losing a powerful ally.
“Nvidia is the central bank of AI, and suddenly the Fed chairman is gone,” said Tomasz Tunguz, an investor at Theory Ventures, which funds young startups.
Nvidia held stakes worth $48 billion in 229 private companies at the end of July, including large stakes in OpenAI and Anthropic, according to securities filings. He more than doubled his initial investment in six months.
Perhaps more critically, Nvidia has given start-ups and small companies access to AI chips that would otherwise be difficult for them to obtain, offering $165 billion in lease guarantees and other cloud computing insurance to start-ups and other companies, according to securities filings. The company has a venture capital arm and a program called Inception that provides tens of thousands of startups with training and guidance on how to access chips and computing power.
Mr. Huang has also been the most vocal proponent of “open source” and “open scale” technology, which makes the core AI technology freely available to anyone, benefiting start-ups. Nvidia spent nearly $20 billion last year buying two open source companies.
Mr. Huang’s departure adds further uncertainty to an already jittery market. Investors worry that AI is in a bubble that could burst. And the tech industry also faces potential regulation and a slowdown in data center construction brought about by the midterm election results. Nvidia controls the vast majority of the world market for the computer chips that artificial intelligence companies need to build and service their technologies.
A change in leadership could make it harder for smaller companies to access the chips and cloud computing power they need to compete with well-funded tech giants such as Amazon, Google, Meta and Microsoft. More practically, it puts a number of investment deals Nvidia is working on into limbo.
Mike Volpi, an investor at Hanabi Capital, a venture capital firm that backs artificial intelligence companies, said he expects Nvidia to take a more conservative approach to securing so many smaller cloud companies.
“I expect to see some turbulence in the short term and some Nvidia funds exiting the market,” he said.
The artificial intelligence industry relies so heavily on Nvidia that commentators have begun to warn of risks.
Speaking to a standing-room-only audience of software developers in San Francisco last month, Dylan Patel, who runs SemiAnalysis, an artificial intelligence research company, warned that young companies struggling with data centers have no problem securing revenue guarantees from Nvidia. This allowed companies to take on debt that they otherwise would not have acquired.
“It’s quite a risky proposition,” Mr Patel said. “We’ll see what happens there in the end.”
Mr. Huang’s pro-startup stance has brought venture capitalists a windfall of cash in the past year, particularly with Nvidia’s purchases of start-ups. The company bought technology and staff hires from chip maker Groq for about $20 billion last December and open-source AI platform Hugging Face for about $14 billion in September.
“Jensen Huang, we have yet to meet, but bravo!” Joseph T. Hasselmann, a startup investor who backed Groq, he wrote on LinkedIn after the deal was announced.
Samantha Lau, who manages a portfolio of technology stocks at investment firm AllianceBernstein, said Mr. Huang’s departure would likely remove a key source of funding for companies such as data center startups planning public offerings and dampen overall market enthusiasm.
“The god of circular finance is going into hibernation,” she said, referring to the many interconnected businesses in the AI industry.
Sujay Jaswa, a partner at Wndr, a venture capital firm that hosted Mr. Huang as one of its events, compared his resignation to the death of Steve Jobs.
“It’s a huge loss for all of us,” he said.