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How the smartest company in the world thinks about investing in startups (NVDA)


NVIDIA employees

  • Nvidia is one of the best-performing companies of 2017, and it has a somewhat unique approach to investing.
  • The company isn't necessarily trying to make money from the startups it invests in, but it is trying to get more people to use its GPUs.
  • As more data in the world is processed using artificial intelligence, the companies Nvidia invests in can help it create more potential customers.
  • Check out how Nvidia's stock has done this year.

Nvidia, the maker of the graphics chips powering modern video games, was crowned the smartest company in the world this year by MIT, and it didn't get there by accident.

The company helped spark 2017's artificial intelligence revolution by providing the computing backbone for all the power-hungry AI systems. Its powerful graphics processing units and its CUDA software platform help speed up AI research in a way that isn't otherwise possible.

MIT estimated that the company spent around $3 billion on its own R&D to develop its newest chips, but Nvidia is also investing in smaller companies and startups working on AI applications.

According to Jeff Herbst, Vice President of Business Development at Nvidia, the company has two main goals when it invests in a startup: make money, and spread the GPU gospel.

According to Herbst, 90% of the today's data goes unprocessed, which is a travesty. For Nvidia, every underutilized dataset is another that could have been processed by one of its GPUs. To that end, the company looks for companies that can process more of the world's data in unique and interesting ways. 

There are three types of companies Nivida is currently investing in; self-driving cars and automotive companies, data analysis and artificial intelligence, and GPU deep learning. Nvidia's current portfolio consists of more than twenty companies. Some, like Graphistry, are working on better ways to sort and use large data sets, while others, like DriveAI, are using data to develop the brains behind self-driving cars.

Herbst declined to provide the size of any of the investments or to quantify the performance of Nvidia's portfolio. He did say that Nvidia has done as good or better than the top venture capital funds.

Herbst said that it's only the "beginning innings" of AI research, and Nvidia is betting it can be there for the rest of the game. Part of those bets just happens to be in other companies.

Read more about what's coming for tech in 2018.

Nvidia stock price

SEE ALSO: TOP TECH ANALYST: Only one thing could stop the FANGs from skyrocketing in 2018

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