In this episode of Motley Fool Hidden Gems Investing, Motley Fool Chief Investment Officer Andy Cross talks with Stephen Witt, author of The Thinking Machine: Jensen Huang, Nvidia, and the World's Most Coveted Microchip.
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Stephen Witt: Who was building robotic inference chips in 2017 when there was no robotics industry trying to buy this stuff? It was Jensen, and it was Nvidia. I've talked to maybe 40 robotics manufacturers in the past three or four months. Every single one, without exception, runs on an Nvidia Thor Jensen chip in its brain. He is a monopoly on the robotics inference market, which did not exist until he invented it.
Mac Greer: That was Stephen Witt, author of The Thinking Machine: Jensen Huang, Nvidia, and the World's Most Coveted Microchip. I'm Motley Fool producer Mac Greer. Motley Fool Chief Investment Officer Andy Cross recently talked with Witt at our Motley Fool One member event in San Diego. It was a great conversation. It covered a lot of ground, including the current state of Nvidia, what really drives Jensen Huang, and why robotics might be Nvidia's next big market. Enjoy.
Andy Cross: Early in his career, Stephen worked for a hedge fund. His writing has appeared in The New Yorker, the Financial Times, New York magazine, the Wall Street Journal, Rolling Stone, GQ, and his book right there, The Thinking Machine: Jensen Huang, Nvidia, and the World's Most Coveted Microchip, won the 2025 Financial Times and Schroders Business Books of the Year. Stephen Witt, thank you for being here. Stephen and I talked about a year ago. You can find that on The Fool website. We had a great conversation about Nvidia. Stephen and I just want to start off with it's clearly one of the, if not the most important company in the world. But what is the current story about Nvidia right now? What are you seeing about Nvidia in the market?
Stephen Witt: Probably the most important thing is, like, are we in an AI bubble? Nvidia is not actually overvalued in classic metrics, right? It's forward PE is 21, which is not some insane number. The question is, is that PE sustainable? Will it materialize? Jensen has spent the last year trying to more or less guarantee that it will. The big thing that has happened since my book came out is, obviously, we've had the Trump administration come in, and Jensen has got really personally close to Trump. They've appeared in public six or seven times. All of the Silicon Valley guys went towards Trump, but Jensen went towards him the most aggressively. If I'm being real, I think he's been maybe the best at sort of manipulating Trump to get what he wants out of him. He's extraordinarily skilled at that, and Trump is a somewhat erratic figure. He's difficult to predict what he's going to do.
But so far, every decision he's made at the geopolitical level has been in line with Jensen's interests, which is pretty extraordinary, leaving aside Iran and stuff, but all of the stuff in Asia has benefited Jensen. He lifted the chip ban on Chinese sales. He kind of has been involved in not putting tariffs on Taiwanese semiconductors, and then, probably most importantly, for Jensen, he's allowed or continued to allow H1B visa holders to come into Jensen's company. If you go to Nvidia now and look around the workforce, I would guess fewer than 50% of the people in the company were born in the United States. It's just this incredible agglomeration of worldwide engineering talent from Asia, from Europe, Middle East, all over. That's what makes Nvidia work. It looks like a company that sells microchips, but they are, in fact, a large and sophisticated R&D laboratory on the order of something like Bell Labs, but they're much better at commercializing their products.
Andy Cross: That's incredible. What is the statistic about how many millionaires and billionaires are inside the Nvidia company today, the estimates of that?
Stephen Witt: It's funny. I'll give a long answer. In 2005, you recommended this stock. It looked terrible. For the first probably six or seven years, you recommended it. In 2008, their stock went down 80%. People inside the company were growing upset because they'd purchased stock via the ESOP, and they were like, I'm really underwater here. Like, what do we do? Jensen implemented this policy that not only could you buy Nvidia stock if you're an employee at a discount, but you could actually buy it at a discount to any point the stock had traded it in the last two years. As Nvidia's stock started to go like this. They kept that policy in place, so every employee in the place did this free money trade where they maxed out their cap to the ESOP and basically put all of their incremental earnings into, like, basically free money and video stock. Then the rest of them just held it. Now, 50% of the company. There's only like 40,000 people at the company. 50% of them have a net worth exceeding $25 million.
Andy Cross: Nice. [LAUGHTER] That's incredible.
Stephen Witt: If you look at the top layer of management, I mean, they're all at least sent to millionaires, if not billionaires. I was talking to Tench Coxe, who's been on the board and actually was one of the first investors in 1993 before they went public. Tench has invested in thousands of companies, both as a venture capitalists as a kind of classic stock market investor. I was like, Is this your best investment? He looked at me like it was the dumbest question anyone had ever asked him. He was like, Yeah, it's my best investment. Later, I realized that if you have a founder's stake in the most valuable company in history, then, by definition, that is the single best investment you could ever make in human history. Intention made it.
Andy Cross: It's just incredible. You just mentioned about the R&D efforts behind Nvidia, and a lot of people and analysts think that Nvidia is really good at catching the wave. But your take is different, and I want to unwrap this a little bit, because they really are creating the waves. They're like, the tsunami of the earthquake, they make the wave.
Stephen Witt: Jensen calls this the zero billion-dollar market. What it is, it's building products that not only don't have any competitors, but actually have no customers. That serious. That's the zero and zero-billion-dollar market. There is no customers. When Jensen started building dedicated hardware for artificial intelligence, that market segment did not exist. Now, this would be a little crazy to think about. Now, 15 years ago, AI was a career graveyard. The total amount of venture capital investment in AI in 2010 was closer to zero than any other meaningful number. Not only that, but it had repeatedly disappointed investors in the past, and so it was just music, not just a dead field, but like a radioactive field. You just didn't go there with money. And every AI scientist I worked for that time was like, Yeah, I just kind of figured I would do what all AI people did, which was, deliberately earn less money for the rest of my life so that I could work on the thing I was actually interested in, and I'd be a research academic.
Guys who really invented the modern neural net had so little money that they actually had to pool their housing stipend together to buy two Nvidia gaming boards to train the first neural network. That's the first really modern neural network. That's where this stuff comes from. Jensen was serving this market segment that was so small that it was essentially invisible. He's making these gaming cards. The original use is to speed up your frame rate in Quake or in Halo. The reason you do that is that if you're shooting at the guy, you want a few more frames per second so you can get a better bead on him. That's the technology that powers all of society now. That's serious.
That's why they did it. But this cutting-edge use case had a lot of other applications, and one of them was kind of scientific computing, or what we call supercomputing. Now, Jensen basically shipped all these cards with a second program on it where you could flip the switch and turn your gaming board into a low-budget supercomputer. Who was that for? Well, it's not for an established research scientist. Those guys can afford time on a conventional supercomputer. It's for a scientist whose research is out of favor for marginalized scientists with no funding. It's for a mad scientist. That's what these guys were. That's what these AI guys were. There were mad scientists working off in the woods on weird projects that no one ever thought would succeed. And Jensen gave them the tools to not just create the thing they wanted to create, but actually to create an entire ecosystem and industry around it.
This is how the zero-billion-dollar market works. You go to a place where not only is there no competition, there's almost no customers at all. Then you hope that the field grows around what you've built, then you've locked them into your system because you were the only one providing it at the original thing, and you build a whole ecosystem around it. Jensen is doing this today. I'm writing about humanoid robotics right now for The New Yorker. This is the coming wave of home humanoid robots. They look, and they move, and they act like humans. They're going to be shipped into industry, into service jobs, and maybe even eventually into your home. Well, to do this, you need a powerful AI inference chip, OK? This is the chip that is basically the robot. Literally, it's his brain, right? It's a robot brain.
Who was building robotic inference chips in 2017 when there was no robotics industry trying to buy this stuff? It was Jensen, and it was Nvidia. I've talked to maybe 40 robotics manufacturers in the past three or four months. Every single one, without exception, runs on an Nvidia Thor Jensen chip in its brain. It is a monopoly on the robotics inference market, which did not exist until he invented it. This is how Jensen thinks, and this is how he works. There's a cost to this, right? Like, he's losing money for years. Building these products that nobody is buying. Actually, in the old days in 2005 days, it almost got him kicked out of his job. The investors didn't like it. They were like, What are you doing? You should be returning this money to shareholders via share purchases or paying a dividend. Why are you chasing this pie-in-the-sky market that doesn't exist? But he had the last laugh.
Andy Cross: Yes, a lot of laughs. How does Jensen marshal? You mentioned about just the challenge of talking to investors when they're making these investments, but just in a company like Nvidia, how does he marshal the commitment to be able to be that forward-thinking in the way that he's attacking these big problems?
Stephen Witt: From Jensen's point of view, it's actually riskier not to do it. I remember asking him, Why did you ship this expensive supercomputing software with every card, including the ones you're selling at Best Buy? Like, why are you doing that? He's like, Well, it was risky to do that, but there was also a risk in not doing that. A long time I didn't understand what he meant. But Jensen is a disciple of Clayton Christensen, wrote a book, as I'm sure you're familiar with, called The Innovator's Dilemma, and this is the book that brought the buzzword “disruption” into kind of modern parlance. The term disruption has grown meaningless through overuse. But if you go back and read the original version, what Clayton is talking about is not necessarily high-tech technology. In fact, a pneumatic shovel was one of his first disruptive technologies. The canonical example he uses was the Honda motorbike.
When Honda entered the U.S. market in the ‘60s, there was no room for another car. They marketed a dirt bike to teenagers, basically. Actually, the Beach Boys wrote a song about it. This was a low-margin, small, zero-billion-dollar market, basically. But what Honda realized is that if they could kind of sell this market here, GM wouldn't come and compete with them. It would lower GM's margins to build a dirt bike. They're selling Cadillacs, they're a high-margin product. If they go and open this small dirt bike business, then investors will yell at them because their profit margins just went down. It's hard to move from a high-profit business into a lower one. But if you don't do it, then you're very vulnerable to disruption, to competition coming up from below. That's exactly what happened to GM, which, by the way, in the 1970s, they were the Nvidia of their time. They were the most valuable firm in the United States. But Honda came and raided their whole market from below, as they iterated upwards from the dirt bike to a compact car to a minivan, and eventually, GM has nowhere to go. Honda and Toyota have stolen all their market.
With Jensen, he's like, and this is the secret of the Innovator's dilemma. It's not actually a manual for how start-ups can succeed. It's a counterinsurgency manual for how established firms that are aging out of their market can defend their territory against these start-ups. By the mid 2000s, Jensen, who had dominated the gaming market, was now terrified of all these Asian start-up companies that were going and building cheaper tools. He said, I have to invest counterintuitively in a low-margin business with very few customers. It's exactly what Clayton Christensen advises in his book.
Actually, Jensen hired Clayton as a consultant. I have to go invest in a market that is small that does not return immediate capital. Because my competitors won't follow me there. That's the only way to save this business. For Jensen, the risk of inaction, the risk of not doing this is actually higher than the risk of just continuing to, as he understands it, especially in tech, especially in tech, and especially in semiconductors, you cannot sit still. Only the paranoid survive, as Andy Grove said. I have to build a business that's adjacent to Oh, and by the way, my business, we don't manufacture anything here. It's all done in Taiwan. This is just an R&D laboratory. If I'm not constantly designing innovative new products, I have no purpose to exist, and I'll be competed out of existence.
Andy Cross: You've written that he basically thinks, like, Hey, we're 30 days going out of business at any given time.
Stephen Witt: That's right. In fact, it was literally true several times at the beginning. It was tough sledding for Jensen. If you look at the first 15 years, even as a publicly traded company, it looks like an electrocardiogram of somebody having a heart attack. The stock went down 90% twice. It was tough. Tough, tough, tough. He almost lost his job. There were activist investors involved, and during this period, he was just trying to get this company to find a market beyond video games. I should say there were a lot of things that failed. There were a lot of zero-billion-dollar markets that, to this day, remain zero-billion-dollar markets. The customers never showed up for what they were building. But to Jensen, that's okay. As long as one succeeds and you become the most valuable firm in human history, it doesn't matter if the other one's fair. In addition to robotics, there's 30 initiatives now, I think a lot of them will not succeed, and he would probably tell you that. But he sees the logic, at least, or the potential for customers to arrive in each one.
Andy Cross: You earned, and you were given unparalleled access to Nvidia, Jensen, his team. What was the thing that impressed you the most? What was the thing that maybe surprised you or maybe even unnerved you about learning about Jensen?
Stephen Witt: The best thing about Jensen is just his candor. I interviewed Jeff Bezos once. This was in, like, 2016, and Jeff is surrounded by an army of PR people and lawyers. I have a list of preapproved questions that I'm allowed to ask. I tried to ask him about this was in 2016. I tried to ask him about Donald Trump's presidential candidacy, and the lawyer basically tackled me and dragged me out of the room. You don't go off script with Jeff. With Jensen, there is no script. You can ask him anything. Is this guy worth like $100 billion? He talks to you as if you're just sat down at a coffee shop with him. It's amazing. That's extremely rare. It doesn't happen with CEOs in my experience, and I've tried to interview or have interviewed many of them. His candor is just extraordinary, and it really helps him in business, too, because he is the fastest to admit if something's not working, what needs to change. There was no illusions, and there's no sunk cost fallacy with Jensen. He's a really great critical thinker, and it's because he's so honest and rigorous with himself.
Now, the flip side of this is like a Greek tragic flaw, the same thing that makes him great, kind of makes it difficult for him. He's totally neurotic. I can confirm your suspicions that most CEOs are basically egomaniacs. But Jensen is not. Truly. He truly is not. In fact, he's like, riddled with guilt and self-doubt. This drives him. It fuels him. This is what makes it work for him because he's constantly assessing both Nvidia's competitive position and his own role and asking, What's the thing that could make this company collapse. Weirdly, almost everything Jensen does comes from a negative emotion that he has, typically fear or guilt, and almost every action Jensen takes is actually, or at least can be construed as a defensive action to save his company from ruin. It's a really unusual way of thinking, and I think, actually, his internal life is kind of hard. Probably most people in this room have an easier kind of internal mental monologue than Jensen has for himself. In some sense, he truly is almost uncomfortable in his own skin. He almost, like, hates himself. He's beating himself up constantly. I find this in some ways relatable.
I remember I was talking to Jimmy Iovine on, this is on a separate story I wrote about music. Jimmy Iovine is a music producer. He worked with Dr. Dre. But early in his career, he'd worked with Bruce Springsteen, he's like, I'll never forget when Bruce Springsteen came into the studio, and he was like, God, I'm washed up. All of these younger artists are doing better work than me, and it's all over for me. It's all over for me. Then he writes Born In The USA. It comes from a place of feeling, like he's washed up after 10 years in the music business. It comes from fear. And Jimmy Iovine was. I can't believe how powerful a motivator fear can be for an artist. I guess it's true for a CEO, too.
Mac Greer: As always, people on the program may have an interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For the Motley Fool Hidden Gems Investing team, I'm Mac Greer. Thanks for listening, and we will see you tomorrow.
Andy Cross has positions in Nvidia. Mac Greer has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
