Want to know how to go from startup to world’s most valuable company? Look at Nvidia’s investments

AI-chip company Nvidia has leaned heavily into corporate venture tools in building the company, investing some $100bn in the past few years into AI startups. It has already realised tens of billions of dollars in paper returns from the sale of portfolio companies xAI and Cursor to SpaceX, as the FT reports.

Nvidia was itself the recipient of corporate venture backing from SEGA during its nascent years, and understands the power of the model. Jensen Huang, Nvidia CEO, joked about SoftBank’s failure to hold Nvidia stock long term — SoftBank acquired a 4.9% stake in Nvidia in 2017, valued at about $4bn, but sold it off by 2019. Masa Son’s conglomerate would have earned nearly $1trn if it had held on to its position in what is now a business worth $5.5tn.

But the real gains from CVC investment for Nvidia are not the returns from exits — it is the way these investments are used to create aligned business relationships. SpaceX, for example, has an exclusive relationship with Nvidia to use its AI tech to build out its planned near-10GW data centre by the end of next year.

SpaceX will be a large user of Nvidia’s Vera Rubin processors, with some $150bn to $300bn in real cash flowing into Nvidia’s books. That is about a 20th of Nvidia’s current market value of more than $3bn — a high price-to-sales multiple for a hardware company but reflecting Nvidia’s strong market position and the “stickiness” of the services ecosystem that users of its chip enter into. It is also interesting to note that the market takes a much more positive view of buying equity stakes in a customer than it does of traditional vendor finance deals.

Now, that’s strategic if you are a CEO of any business.

There is more discussion of strategic use of corporate venturing tools at our next Executive Leadership Forum event in New York in October.

See all of Nvidia’s recent startup investments in our CVC Funding Round Database.