Sega’s investment saved Nvidia from bankruptcy in the 90s; today it would be worth 1 trillion
Before reaching the position of the world’s most valuable company in the era of artificial intelligence, Nvidia faced a critical moment that almost led it to bankruptcy. Surprisingly, the salvation of the creator of GeForce cards, in 1995, came from a former video game giant that currently does not produce consoles: Sega.
The reunion between the two companies took place this Wednesday, August 16, 2023, during an event in Tokyo that celebrated three decades of partnership. The celebration was held at GiGO Akihabara Building 3, a place that once housed the well-known Sega Akihabara Arcade.
During the event, Nvidia took the opportunity to announce that Virtua Fighter Crossroads and other Sega games will be part of the RTX Spark, its new superchip developed for ultra-thin Windows notebooks and compact desktop computers.
The ceremony was attended by important figures from both companies, including Jensen Huang, founder and CEO of Nvidia, Haruki Satomi, president and CEO of Sega, and Shuji Utsumi, COO. Also present were the legendary developer Yu Suzuki, known for creating Virtua Fighter and Virtua Racing, as well as Shoichiro Irimajiri, former president and CEO of Sega, who was instrumental in authorizing the contribution of 5 million dollars to Nvidia during its period of greatest financial difficulty in the 90s.
At this meeting, Huang once again expressed his public gratitude for the support that Sega provided, bringing to mind one of the most decisive moments in the company’s history.
“If it wasn’t for Sega’s help to Nvidia, we wouldn’t be here today. It’s unbelievable to think that in 1995 we were on the brink of collapse and today we are the biggest company in the world,” said Huang.
During the conversation, Jensen Huang revealed his admiration for Suzuki’s work on Sega’s 3D arcade games, mentioning how these creations were important in developing his interest in technology and real-time graphics.
According to Huang, Sega’s financial contribution of 5 million dollars was crucial for Nvidia to continue operating and, thus, be able to create the products that would transform the course of its history.
The technological risk that pushed Nvidia to the limit
The crisis began in 1995, when Nvidia invested in the NV1 graphics chip. This architecture was based on quadrilaterals for 3D rendering, different from conventional triangles. However, this technological choice collided with the DirectX standard, recently launched by Microsoft, which made it difficult for developers to accept the technology.
In the same period, Nvidia collaborated with Sega on a project for the console that would succeed the Saturn. However, technical disagreements caused the Japanese company to withdraw from the partnership and look for an alternative for the device that would later become the Dreamcast.
With an uncompetitive product, no space in the market and the contract considered ideal canceled, Nvidia found itself on the verge of bankruptcy. It was then that Shoichiro Irimajiri made an unexpected decision: despite rejecting Nvidia’s technology for the Dreamcast, he wrote a check for 5 million dollars, investing in the startup because he trusted in the potential of its engineers.
How a Modest Investment Generated a Trillion Dollar Profit
Thanks to this financial relief, Nvidia had the time it needed to develop the remarkable GeForce 256 in 1999, an innovation that transformed the personal computer industry and set the stage for the creation of Microsoft’s original Xbox chip.
Shortly after Nvidia’s recovery, Sega chose to sell all its shares in the company, raising 15 million dollars. At that moment, a return of three times the amount invested seemed like an excellent deal for a company that was beginning to feel the weight of serious economic difficulties.
However, what became a “painful detail” is that, if Sega had maintained these shares until the present, that same stake would be worth more than 1 trillion dollars today.
Today, more than thirty years after the event, this story continues to be one of the most intriguing facts in the gaming sector. A modest investment from Sega was essential to save a company that, over time, would become a leader not only in the gaming market, but also in the artificial intelligence revolution.
