29 May 2025

The chip giant’s survival isn’t only a story of technical innovation. It is a story of humility in the face of failure and the courage to pivot when it matters most.

On a chilly, overcast day in February 1993, three men huddled around a booth in a Denny’s restaurant in San Jose, California. It was Jensen Huang’s 30th birthday. As he and his fellow co-founders, Chris Malachowsky and Curtis Priem, signed the founding documents for their new company, they ordered Super Bird sandwiches and bottomless coffee. They chose to call their new company Nvidia, after the Latin word for envy, and decided the corporate colours would be green.

The trio of electrical engineers had every reason to be confident. Each had a stellar reputation within the electronics industry, and with $2 million in seed funding secured, they were primed for success. But the journey ahead would be far more treacherous than any of them anticipated.

In the early 1990s, video games were mostly confined to consoles such as the Super Nintendo and the Sega Mega Drive (or the Genesis, as it was known in North America). Graphics were two-dimensional, and though enjoyable for their time, they were a far cry from the sophisticated visual experiences we enjoy today. Huang, Nvidia’s chief executive, and his co-founders could see a future where three-dimensional graphics would revolutionise gaming, and they were determined to be at the forefront of it.

The decision they made in that Denny’s booth was bold, and it almost destroyed them.

Rather than entering the crowded 2D graphics-chip market, Nvidia chose to gamble on 3D. Their first chip, the NV1, was designed to render images using quadrilaterals (quads), a novel approach that Huang believed was superior to the industry standard of using triangles. The logic was sound: quads could offer more flexibility in rendering complex shapes.

But Nvidia soon discovered they had severely misjudged the market.

Game developers, the lifeblood of Nvidia’s success, were accustomed to rendering images with triangles. The industry had standardised around this method, and there was no appetite to shift to quads, regardless of their potential.

The result? The NV1 was a commercial disaster. Nvidia shipped 250,000 units of its new graphics chip. All but 1000 were returned. Huang would later admit, “It was a great technology achievement. It was a terrible product. The list of mistakes that we made, and that I made, in the company’s first three years, you really could write a book.”

Huang and his co-founders had assumed their technical expertise would be enough to lead the market towards a new standard. But they failed to see a critical blind spot: while their approach might have been theoretically superior, it was out of sync with what their target market wanted. The NV1 debacle should have been a wake-up call. But instead of pivoting, Nvidia doubled down on the same approach.

Their next chip, the NV2, also rendered images using quads, and once again, they banked on the hope that game developers would eventually come around. But in August 1995, Microsoft released Windows 95, igniting the personal computer revolution Huang had anticipated. A month later, Microsoft introduced DirectX, a suite of tools that set the standard for how software and games would interact with PC hardware, and it standardised the use of triangles for rendering graphics.

Nvidia had misjudged the market.

Huang realised the gravity of their situation: “The architecture we chose was clever at the time, but it turned out to have been the wrong architecture completely. And so the question is: what do we do?”

The answer lay in honesty and an unexpected lifeline.

By this point, Nvidia had caught the attention of gaming giant Sega, which was hoping to use Nvidia’s NV2 technology for its forthcoming console. But with DirectX now dominating the market and Nvidia’s graphics chip incompatible with the triangle rendering standard, the partnership was on the verge of collapse. Huang knew he had to act quickly if he wanted to save his company.

In the summer of 1996, just three years after Nvidia’s founding, Huang sat down with the CEO of Sega America, Shoichiro Irimajiri, for one of the most important meetings of his career. Humbled by the failures of the NV1 and NV2, Huang admitted to Irimajiri that Nvidia had made a critical error with their architecture.

The product Nvidia had been contracted to deliver was doomed. Huang then made a bold request: he asked Sega to pay out the contract in full, even though Nvidia had failed to deliver a viable product. “I needed Sega to pay us in whole or Nvidia would be out of business,” Huang later recounted.

To his surprise, Irimajiri did not shut the door on Nvidia. Instead, he admired Huang’s honesty and saw potential in Huang and his team, despite their setbacks. “I wanted to make Nvidia successful,” Irimajiri recalled years later. “Somehow.”

Against all odds, Irimajiri convinced Sega’s headquarters to not only pay out the contract but to invest an additional $5 million into Nvidia, buying the fledgling company six more months to survive. “It was all the money that we had,” Huang said. “[Irimajiri’s] understanding and generosity gave us six months to live.”

“Confronting our mistake, and with humility asking for help, saved Nvidia,” Huang said in a commencement address to National Taiwan University in 2023. “These traits are the hardest for the brightest and most successful.”

That moment marked a turning point for NVIDIA. With his back against the wall, Huang knew the only way forward was to abandon the company’s flawed approach and realign with the industry standard.

Armed with Sega’s financial lifeline and newfound clarity, Nvidia went back to the drawing board. It scrapped its quad-based architecture and committed to rendering images using triangles, in line with DirectX and the rest of the industry. But time was not on its side. Nvidia had only six months to develop a new graphics chip – an impossible task under normal circumstances, as it typically took two years to bring a new chip to market.

Huang, however, was determined. He had heard about a Silicon Valley startup, Ikos, that had developed an emulator – a massive piece of hardware that could simulate the functionality of another device.

When Huang contacted Ikos, he learnt it had just gone out of business. But there was one last emulator sitting in a warehouse, a large piece of hardware the size of a fridge and with a price tag of $1 million at the time. With Nvidia’s future hanging in the balance, Huang purchased the emulator, hoping it would help Nvidia deliver its new product on time. It would also use up much of the company’s rapidly depleting funds.

The gamble worked. Nvidia’s third graphics chip, the Riva 128, was developed and released in a record-breaking six months. And this time, it rendered images in triangles rather than quads. The Riva 128 was a massive success. It sold 1 million units in its first four months, catapulting Nvidia back into the spotlight and saving the company from certain collapse. Not only had Nvidia managed to survive, but it had also learnt how to streamline its development process, allowing it to release new products at twice the pace of its competitors.

“The Riva 128 shocked the young market, put us on the map, and saved the company,” Huang says. From that moment on, Nvidia built its entire corporate culture around the principle that had saved them: intellectual honesty.

It became one of the company’s five corporate values and is still in place today. For Huang, the key to Nvidia’s long-term success wasn’t just about creating cutting-edge technology. It was about recognising blind spots before they became fatal mistakes. “The ability to call a spade a spade, to act as quickly as possible to recognise that we’ve made a mistake, and that we learn from it and quickly adjust,” Huang explained, became one of Nvidia’s core values.

Huang’s willingness as a leader to admit mistakes and seek help – both from Sega and from his own team – became a cornerstone of Nvidia’s culture. As the company grew, this mindset allowed it to innovate rapidly and adapt to the ever-changing landscape of technology.

Nvidia’s survival isn’t only a story of technical innovation. It is a story of humility in the face of failure and the courage to pivot when it matters most. “I think it’s when the company faces adversity of extraordinary proportions – when there’s no reason for the company to survive, when you’re looking at incredible odds – that’s when culture is developed, character is developed,” Huang reflected years later.

This is an edited extract from Blindspotting by Kirstin Ferguson (RRP$36.99, Penguin Random House Australia). Published June 3.

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