The market capitalization exceeded $2.6 trillion! Behind NVIDIA's "hurricane" is Huang's "crazy" management: no 1v1 meetings, no reporting, no hierarchy

National Business Daily

2024-05-25 14:57Posted on the official account of Sichuan Daily Economic News

Reporter: Cai Ding Editor: Lan Suying

On Thursday, May 24, Eastern time, Nvidia released the first fiscal quarter of fiscal 2025 (ending April 28, 2024), and the company's results and outlook exceeded expectations. Buoyed by the news, the stock price hit a record high, closing at $1,064.69 on Friday, with a market capitalization of $2,623.1 billion, surpassing Amazon and Tesla combined, and the market value soared by $377.4 billion during the week.

Nvidia stock price action Image source: Google Finance

During the reporting period, NVIDIA's revenue increased by 262% year-on-year to $26 billion, far exceeding the consensus expectation of $24.5 billion and hitting a record high. Net income increased 620% year-over-year to $14.88 billion, and adjusted earnings per share increased 461% year-over-year to $6.12. At the same time, the company expects its fiscal second quarter revenue to reach $28 billion, compared to the consensus of $26.8 billion.

Driven by the stock price, Nvidia CEO Jensen Huang's net worth rose to $93.6 billion, ranking 17th on the Forbes list of the world's richest people.

It is worth mentioning that this is the third consecutive quarter that NVIDIA's revenue has grown by more than 200% year-on-year. In a subsequent earnings call, Huang said, "The next industrial revolution has begun...... In addition to cloud service providers, generative AI has expanded to customers in areas such as consumer internet companies, enterprise, sovereign AI, automotive, and healthcare, creating multiple multibillion-dollar vertical markets. We are at the beginning of the next wave of growth. ”

Why has Nvidia been able to break analysts' expectations and hit new revenue highs? What is it about Huang, who is in his 60s, that excels in management?

Within Nvidia, Huang directly manages 60 people. New York Times veteran reporter Andrew Sorkin asked Huang about this at the 2023 DealBook Summit, what is the significance of this arrangement? Sorkin said that most people think that 6~10 think tank members in a conference room have reached the limit, Tesla CEO Elon Musk has 28 direct reports, and Apple CEO Tim Cook has only 17 people.

Huang Photo credit: Visual China

In Huang's view, a flat organizational structure gives employees more autonomy and believes that executives are managed as little as possible, and that this style of management is characterized by no planning, no reporting, and no clear hierarchy.

Huang strongly disagreed with the belief by many CEOs that "the CEO's information should be valuable, confidential, and shared only with two or three other people, and that information is so priceless and confidential that it can only be shared with a few people," Huang said: "I don't believe in a culture, an environment, where the information you have is the reason you have power."

Instead, he believes that the role of management should be to empower employees to do their best. "You should create the conditions for them to be able to do their life's work, that's my mission." He said.

Although he now directly manages a team of 60 executives, he avoids 1-on-1 meetings and replaces them with group discussions, which has the benefit of ensuring that everyone is on the same page, starting at the top.

Moreover, NVIDIA's meetings are not limited by position or level, from vice presidents to junior employees, everyone has access to all the company's information and has the right to participate in any meeting.  "If we have a strategic direction, why should it be known only to a few? Tell all our employees and we'll be able to brainstorm ideas. We just send an idea to everyone as soon as we have it, and then we wait for people to give us feedback, and we use that feedback to refine it. He said.

In his view, sharing strategic direction with all employees in the company is about leveraging the wisdom and expertise of the entire company to develop a more refined and well-thought-out strategy.

In addition, Huang doesn't like to have plans and have employees write reports. In his view, such reports often arrive in his hands and are detached from the basic facts. To stay up-to-date on what's happening at the company, Huang encouraged all employees to write him an email with the subject line "The Five Most Important Things on Their Minds" right now. Every morning, Huang reads about 100 of these emails.

Nvidia's organizational structure, led by Huang, has three core goals: to attract the best talent in the industry, to build the most capable and efficient teams to operate, and in the process, to ensure that information flows quickly and effectively throughout the company.

While this management is somewhat unique and even crazy, it retains the flexibility of start-ups and avoids the bureaucracy and rigidity that prevail in large corporations. And it is this management model that has pushed Nvidia's market value to $2.6 trillion, making it the third largest company in the world by market capitalization, after Apple and Microsoft.

National Business Daily

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