Understandably, many of today’s technology headlines focus on AI platforms like ChatGPT. But there is a parallel AI hardware story that gets less ‘newspaper inches’. Nvidia is the most exciting name in semiconductor hardware at the moment. Other significant players like Intel, AMD, and Samsung have been struggling to replicate Nvidia’s success. But they’re working on it.

Watching this situation, I see two timeless strategy lessons in action. First, start early with strategy choices and the resource allocation to execute on those choices. Nvidia chose their market focus and allocated the appropriate resources early. They are the industry leader now. But it took some time to get there. Nvidia’s stock price was around $6 during 2015. It grew from $60 to $120 during 2020. And, at the time of writing, it is over $430. Growth from new business ideas takes time. Amazon’s Jeff Bezos once famously said that when Amazon has a good quarter that the “quarterly results were actually pretty much fully baked about 3 years ago”.

Second, constantly monitor your circumstances and be ready to re-allocate resources to higher potential businesses. I saw this in action recently. I read in the Financial Times that Samsung’s stock price rose despite the company reporting heavy operating losses. Why? Because Samsung had also announced a huge resource re-allocation away from declining chip markets (e.g. smartphones and PCs) to ‘high bandwidth memory’ (HBM) chips that are crucial components for AI platforms like ChatGPT.

There is a nod to semiconductor history in this piece of news. Memory chips and resource re-allocation were the topics of one of Intel’s most famous stories: The so-called ‘revolving door’ story that long-time Intel CEO Andy Grove tells in his book ‘Only The Paranoid Survive’. In short, Intel had been the leader in the memory chip industry for many years. But competition had become fierce in the early 1980’s, and profits had been driven down. Grove asked Intel co-founder Gordon Moore what a new CEO would do if the board replaced Grove and Moore. Gordon Moore replied by saying that they “would get us out of memories”. So, the two executives metaphorically fired themselves. They then walked out through the revolving doors of Intel’s HQ, walked back in as the new management, and set about converting Intel from a memory chip manufacturer to a computer processor company. And one that would dominate the industry for many years.

So, please don’t assume that today’s strong performance will continue indefinitely. History teaches us that it doesn’t. Commodore PCs, Digital mini-computers, Nortel network devices, Nokia mobile phones, Blackberry smartphones, and Siebel CRM systems were all product leaders at one time. But the respective companies failed to choose their next growth business and allocate the necessary resources.

Instead, be ‘paranoid to survive’. Continuously assess your strategic choices. And commit early to the allocation and re-allocation of resources to new high potential businesses.