Nvidia Corp. faced a near-catastrophic financial situation in the mid-1990s when the company was on the verge of collapse. According to CEO Jensen Huang, the company’s survival hinged on a pivotal $5 million investment made by Sega, which he described as a “gamble.” This revelation came during a recent episode of “The Joe Rogan Experience,” where Huang recounted the critical moments that shaped Nvidia’s future.
In his discussion, Huang detailed a trip to Japan to meet with Sega executive Shoichiro Irimajiri, where he had to deliver troubling news. Nvidia was unable to fulfill its contract to provide a graphics chip for the Sega Dreamcast. “First, the technology that we promised you doesn’t work,” Huang recalled telling Irimajiri. He continued, “Second, we shouldn’t finish your contract because we’d waste all your money and you would have something that doesn’t work. And I recommend you find another partner to build your game console.”
Facing imminent bankruptcy, Huang made a bold plea to Sega. He explained that without an additional cash infusion, Nvidia would “vaporize instantly.” Huang requested that Sega convert the final payment of $5 million on their contract into an equity investment. He candidly admitted to Irimajiri that the investment was likely to be lost, but stressed that without it, Nvidia would cease to exist.
After a few days of consideration, Irimajiri agreed to Huang’s proposal, stating simply, “We’ll do it.” This crucial decision allowed Nvidia to pivot from its troubled NV1 chip and develop the RIVA 128, a groundbreaking graphics processor released in 1997. The RIVA 128 played a significant role in establishing Nvidia as a key player in the PC gaming industry.
The partnership with Sega proved financially beneficial for both parties. Sega later sold its Nvidia stake for approximately $15 million after Nvidia went public in 1999. Huang noted that had Sega retained its shares, they would be valued at around $1 trillion today, a staggering figure reflecting Nvidia’s substantial growth and current multi-trillion-dollar valuation driven by the artificial intelligence boom.
While Sega exited the console market after the Dreamcast’s failure in 2001, it successfully transitioned into a third-party publisher. In contrast, Nvidia has positioned itself as a leading supplier of graphics processing units (GPUs) that are now essential for modern AI projects across the globe.
Nvidia’s stock continues to excel, boasting high ratings in Momentum, Growth, and Quality in Benzinga’s Edge Stock Rankings. Analysts suggest a favorable long-term price trend as the company continues to dominate the technology landscape.
This pivotal moment in Nvidia’s history not only highlights the risks and uncertainties of the tech industry but also underscores the importance of strategic partnerships and critical financial decisions in shaping a company’s future.
