Is Nvidia Remaking the Movie: “Corning 2000”?

It’s the history-doesn’t-repeat-but-it-sure-does-rhyme thing

Nvidia looks like a marvel these days. The company has been around for 30 years. Now it finds itself in the right position at the right time: It dominates in the manufacture of the hyper-fast microprocessors that are exactly what’s needed for suddenly-exploding generative AI. Its stock has rocketed from $120 a share in October 2022 to around $900 a share now, giving Nvidia a market value of $2.3 trillion.

It took me a while, but I just realized that I’ve seen this movie before, up close and personal. And the previous one didn’t end well – nearly ended in disaster..

Which may be worth considering if you’re thinking about jumping on the Nvidia bandwagon.

Here’s the backstory: 

I’ve known Wendell Weeks for a long time. We first met at a telecommunications conference in 1995, where we sat next to each other at dinner and immediately hit it off. Wendell is whip-smart, deeply knowledgeable, funny – often very funny – and exceedingly tall. He was at the conference because, at the time, he was running Corning’s fiber-optic business. Corning had invented optical fiber and was by far the dominant manufacturer. 

I was at the conference as a speaker because I’d just published a book, Megamedia Shakeout, about the emerging digital media boom. (I got lucky – I started the book in 1993 and it came out in April 1995, just as companies like Netscape, Yahoo and Amazon were bursting onto the scene.) Wendell and I discovered that we were the same age, had kids the same age, and had a shared love for New York State’s Finger Lakes. Wendell lived and worked in Corning, N.Y.; I grew up in Binghamton, N.Y. The Finger Lakes are near both.

So after the conference, we kept in touch, became friends, and I paid close attention to his work and career.

Wendell Weeks

Over the following few years, the internet boomed. The supercharged atmosphere of the late-1990s was not unlike what’s going on today with AI. Every company had to consider what the internet would mean to it. Capital flooded into dot-com startups and those companies rushed to scale as fast as they could. Investors and business leaders understood that moving around all of the anticipated swell of internet data traffic would require massive new telecommunications infrastructure. Capital then flooded into telecom upstarts like WorldCom, Enron and Level 3, which meant that those companies had insane amounts of money to spend as they all sprinted to beat the others at building out their networks. 

A lot of the money that poured into telecom companies found its way to Corning. Corning’s optical fiber systems were the core element that could make the internet boom go. No high-speed data networks, no internet boom. Most every company that wanted to compete in carrying internet traffic had to turn to Corning. 

Corning was founded in 1851. It once made those Pyrex coffee pots and Corningware bowls your mom or grandmother probably had in their kitchens. It invented the glass for Thomas Edison’s lightbulbs and the glass for early TV sets. In 1970, Corning researchers invented the first low-loss optical fiber, and the company built fiber into a solid business serving phone companies like AT&T and MCI. Still, in the early 1990s, fiber was just one Corning product among many. Corning’s stock rose steadily but not spectacularly, from around $2.50 in 1984 to about $9 in early 1996. 

As the internet took flight, Wendell went to Corning’s CEO at the time, Jamie Houghton, and pushed for more resources for the fiber division that Wendell ran. Corning’s management decided to lean all the way in on fiber. While the company kept making glass for all sorts of other industrial uses, it pushed almost all its poker-table chips over to Wendell’s bet on fiber. In February 2000, for instance, Corning announced it would spend $750 million to expand its optical fiber manufacturing capacity by more than 50 percent.

For a while, the strategy looked brilliant. Demand from the Enrons and WorldComs and Level 3s went crazy. They had blank checks from investors to spend, and so they did. Wall Street noticed Corning’s opportunity. This 140-year-old company suddenly had the right product and a dominant market position at the exact right time. In August 1998, Corning’s stock was still hovering around $9 a share. Two years later, it was $100.

But September 2000 turned out to be the peak. The dot-com bubble was in the process of bursting. The Enrons and WorldComs and Level 3s had far overbuilt and withered as demand didn’t catch up. What once looked like precious and scarce fiber optic bandwidth turned into a glut. Enron got caught in financial scandals and collapsed in 2001. WorldCom filed for bankruptcy in 2002. 

Wendell had to watch as the hungry demand for Corning’s fiber went poof. By August 2002, Corning’s stock had fallen to under $2. The whole of Corning – one of America’s great industrial companies – nearly went under. The bet on fiber almost killed it.

In 2007, after Wendell was named CEO of Corning (more on that twist in a minute), I interviewed him in front of an audience at the University of North Carolina in Chapel Hill. The transcript was edited into a story for USA Today. I asked him what he learned from the scary free-fall. 

“Wall Street had given (these telecom companies) around over half a trillion dollars, and so when people show up with hundreds of millions of dollars to buy your product, you tend to believe them,” Wendell said. “Our big lesson learned was, for one, it’s not enough just to be the best at what you do. You also have to understand your customers’ business model and your customers’ customers’ business model. We were risking more than money. We were risking significant dislocation of people’s lives. That was my biggest error – not understanding that. I wasn’t alone in not understanding that perhaps Enron’s broadband strategy was ill-conceived. But if I had it all to do over again, we would have tried to understand that better.”

I’m not saying that a similar fate awaits Nvidia, but there are elements of Nvidia’s story that seem to echo back to Corning’s. 

As Wendell alluded to, hardly anybody in the late-1990s thought the demand for fiber would dive. Some analysts in 2000 were still predicting that fiber demand would be nearly infinite. (It may be – but over decades, not a few years.) We can get blinded by what’s happening in the moment and think it will go on forever. A lot of smart people today think AI could go through a 1990s-2000s internet-like cycle of boom, bust and rebirth as this decade unfolds. Nvidia might navigate that well. But, like Corning back then, Nvidia has placed most of its chips (ha – computer chips) on the AI bet.

At least the Corning story avoided a catastrophic ending, for either Wendell or the company. Houghton, an under-appreciated terrific CEO, didn’t fire or demote Weeks. Instead of knee-jerk reacting, Houghton promoted Weeks to chief operating officer. As Weeks told me, Houghton called him into his office and said, literally, “You helped fuck this up. You help fix it.”

Houghton worked with Wendell to stabilize the fiber division and the whole company. By early 2005, Corning stock was up to around $11. In April 2005, Houghton stepped down and made Wendell CEO. Not only had Wendell helped fix what he helped fuck up, he learned valuable lessons about how to make sure the same thing never happens again. He’s still CEO and Corning stock is around $33.

In the decades since, Corning has reinvented itself over and over, which has always been the key to its longevity. It developed the glass for Apple’s first iPhone and dominates the market for smartphone glass. It makes the glass for much of the world’s flat-screen TVs. It makes specialized glass for vaccine vials. And it’s still a major player in fiber optics – a product that is still in high demand.

We’ll see if Nvidia can play that kind of long game.

USA Today has long been lame about digitizing its past stories, so the original is not online. However, newspapers around the country often ran my stories by getting them through Gannett News Service. I found a version on Newspapers.com, as it was published in 2007 in The Daily Spectrum in St. George, Utah.