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Israel’s $2 trillion CTO – Globes


When Nvidia CTO Michael Kagan is asked about the 2019 acquisition of Israeli computer networking company Mellanox Technologies, he asks a cryptic question with a big smile. How much is $93 billion + $7 billion? Answer $2 trillion. Mellanox was acquired for $7 billion when Nvidia’s market cap was $93 billion, and before Friday’s 10% share price fall, Nvidia had a market cap of over $2 trillion. In an exclusive interview with “Globes,” to mark four years since the huge deal, Kagan, who was previously Mellanox CTO, recalls the beginning of his journey sometime in the late 1990s, and recounts for the first time the difficulties he experienced.

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“Mellanox was founded in the old building of the Soltam factory in Yokneam, before the city’s tech park became what it is today,” he recollects. “We even brought chairs from home. The doors of the old rooms, together with some computer cases, served us as desks. There was a pioneering spirit. A ‘startup in the garage’ story in the full sense of the word. Eyal Waldman (Mellanox founder) was in the US most of the time in efforts to raise funds for the company’s activities, while his partners, Roni Ashuri and Shai Cohen, hired the first engineers of the early stage company, and within a few months the number of employees increased to 40.”

At that time, Kagan was mainly involved in the development of Mellanox’s first product – a communications processor: “We called it by the code name ‘Gamla’. Today it is the name of the restaurant in our offices in Yokneam. We worked very hard, and like any startup, there were ups and downs. Not everything was rosy. But in every crisis we encountered, we didn’t give up. We believed in our potential and the products we developed. From there, we began to take off.”

Did you believe that you would go as far as you did?

“Already with the founding of Mellanox, our dream was to build a large and successful Israeli tech company, and that’s what we did. I had confidence in our path, even when it was crooked and not easy. Along the way, we made several significant acquisitions in Israel, which helped bring Mellanox to its peak, alongside organic growth.”

“We brought the technology spaceship to Israel”

Kagan (67) is one of the most senior Israelis in the field of generative AI. He was born in Leningrad (today St. Petersburg) in the then Soviet Union and in 1975, when he was just 18, he immigrated to Israel after being rejected by a top Russian university because of his Jewish name. In Israel he studied electric engineering at the Technion, Israel Institute of Technology in Haifa and financed his studies by working as a cleaner. Today he sits on the Technion’s board of directors.







After his studies and his military service he worked for Intel Israel for 16 years, becoming chief architect, leading the development of chips. In 1999 on the way to hospital to take his wife to give birth, he received an offer from Waldman to help his set up Mellanox.

In 2019, just three years after it had founded its first development center in Israel, Nvidia announced it was buying Mellanox for $7 billion in one of the largest-ever acquisitions of an Israeli company. The deal was completed in 2020 and Mellanox’s 2,000 employees joined Nvidia. At the time of the acquisition, Mellanox had annual revenue of $1.5 billion, while today the annual revenue of the networking technology that Mellanox is responsible for is $13 billion.

Despite the major success of Mellanox since the acquisition, do you not think that the company somehow missed out?

“It doesn’t matter what happened, because it can no longer be changed. I personally had mixed feelings at the time of the sale, because on the one hand we wanted to build an Israeli company, and on the other hand, thanks to the deal, we brought to Israel a global influence that we could not have dreamed of in any other way. In terms of joining a very significant company in the modern computing world of the 21st century, it was the best decision we could have made. Today, one of the pillars of Nvidia is its Israeli technology.

“In this way we brought the world’s largest ‘technology spaceship’ to Israel – and the Israeli brain is in the cockpit. On completion of the acquisition, I was appointed CTO of Nvidia, and today we are part of the team that outlines the company’s global strategy.”

“Most of Mellanox’s employees stayed with Nvidia”

Since the huge acquisition of Mellanox, Nvidia’s activities in Israel have continued to grow and it has set up other development centers around the country as well as acquiring Israeli startup Excelero, which develops data storage solutions based on software.

Nvidia currently has over 4,000 employees in Israel – a rise of 50% over the past four years – based in five R&D centers in Tel Hai, Yokneam, Ra’anana, Tel Aviv and Beersheva. About 13% of Nvidia’s global activities take place in Israel.

“Each and every day I hire 4,000 employees, and at the end of each day, 4,000 people go home and I have to make sure they come the next day. We pay a lot of attention to our people and that is the basis of everything. If a company cares about its people, they will want to work for it, because ultimately nobody in the high-tech field is hungry for bread.

“Mellanox and Nvidia are known as companies where employees stay for many years. In fact, all the founders of Mellanox stayed with the company for 17 years, an unusual figure in the overall global tech landscape,” says Kagan. “Even today, the vast majority of Mellanox employees continue to work at Nvidia, and alongside them we hired thousands more employees.”

Nvidia’s activity in Israel is a major part of its global operations. Just recently, we received evidence of this at the chip giant’s GTC conference, where a series of developments directly related to the company’s activities in Israel were presented. “The technological leadership of the company is in two locations: Santa Clara in the fields of computing, and Israel in AI Factories – factories that turn data into information.

“Nvidia Israel has an important and central role in global operations,” says Kagan. “It all starts with integration into one computer, which is the size of a data center. I mean, Nvidia worldwide develops amazing computing machines, invests in software and integration, and Israel is responsible for communication technology, meaning making it all work together. This is also the reason why Nvidia acquired Mellanox.”

The vision behind the supercomputer

In May, Nvidia announced plans to develop Israel-1, the most powerful supercomputer in Israel and one of the most powerful worldwide. Israel-1 is the world’s first supercomputer based on the new Spectrum-X technology developed in Israel. Although it was planned to be operational at the end of 2023, the first stage of development was completed earlier than expected, and the computer went into initial use in November.

In the first stage Israel-1 serves internal R&D and as a template for building Spectrum-X based supercomputers. One of the purposes of the computer is to serve as a kind of pioneering template for the way in which those infrastructures will be built to create a generative AI cloud.

Kagan says the purpose of the supercomputer is to serve everyone including the main in the street. “Who will be Israel-1’s customer? In the end, the goal is to reach a situation where companies that want to provide cloud services, will be able to provide it from Israel-1, so we are building this infrastructure for them.”

The State of Israel canceled plans to build a supercomputer. Will the product you are developing serve the government here? “If the State of Israel wants to use the supercomputer, then it should contact us. We cooperate with everyone.”

Democratization of AI

2023 was a very successful year for Nvidia. The company’s share price soared 250%, and then a further 60% since the start of 2024, rising about the $2 trillion market cap threshold, although it slipped back down to $1.9 billion on Friday, after the share price fell 10%. Nvidia has in effect almost become a monopoly for AI chips.

It doesn’t look like you have any rivals at this stage?

“Competition is always good. If you don’t have competition, you start to rest on your laurels, and it might not end well,” says Kagan. “However, we don’t compare ourselves with anyone else, but are concerned with future ambitions. We don’t compromise on anything.” In this context, one of the most important parameters in the chip industry, he explains, is time: “Time is important. I can make a perfect thing in 500 years, but who cares? In order to succeed in our world, you have to do things that are difficult to plan and easy to use.”

Kagan stresses that Nvidia is not only a hardware company for processors, but also a software company. “There are many more software engineers in the company than hardware engineers,” he emphasizes. In this context, Nvidia recently announced the launch of NIM – a catalog of dozens of generative AI micro-services from companies such as Meta, Microsoft and others. Put simply, it is a type of app store like Appstore and Google Play, for AI apps. In this way, companies can obtain the models they need, which Nvidia says, will allow many more users to enter the field of AI.

“Chips without software are just expensive sand,” says Kagan. “You have taken silicon, which is sand, and made it more expensive. NIM’s goal is to democratize AI. Take for example today’s smartphone and gadgets – they don’t have a user manual. Everything is intuitive and simple. What we’re trying to do here is the same thing. It’s a massive investment.”

That’s how Nvidia maintains its leadership in the field, isn’t it?

“Ultimately, our goal is for everyone to be able to use our technology. We give those developers a convenient interface. We want them to be able to write their code on an interface that they are comfortable using, even if it’s not always a data scientist.”

“Will AI be abused? Clearly yes”

Today it is almost impossible to come across a field in which AI is not involved. It is used in real estate and construction, banking, insurance, health, retail, agriculture and vehicles. It changes the way organizations work and conduct themselves both with customers and internally with their employees. However, the use of AI arouses disputes. Some see it as an important tool and essential mechanism that may facilitate and change processes dramatically, while others believe that it is high risk and creates uncertainty.

What is your position on the matter?

“Around the world, regulation and procedures are being promoted on the subject and as soon as laws are enacted, we will comply with them. But stopping development now is illogical. We will develop the best things we can think of and the best there are. Our intention is that these developments will be used to make this world good. Will there be people who will abuse it? Of course but there are the appropriate authorities to handle these things, and our teams are working with them.”

Aside from AI, the company has begun operating in virtual worlds in recent years. Nvidia’s platform, Omniverse, is designed to perform simulations and collaborations in real time before the production process begins. For example, an autonomous vehicle in the Omniverse can be trained in the “real” virtual world to deal with traffic accidents, snow and other extreme conditions.

“Cars have to deal with situations that endanger human life,” explains Kagan. “Even if you collect all the data of all these cases, it will not be enough to move your model to a state where you can say it is safe enough. So, instead of building autonomous vehicles and putting them on the road, it can be done first in the Omniverse.

“When I renovated my home, for example, the contractor told me: ‘You in high-tech build huge projects, but you don’t understand that there are glitches or bugs along the way. If I behaved like you I would already be bankrupt. That’s why we conduct simulations before production.”

“Work hard and ignore the background noise”

Despite international criticism of Israel since the war in Gaza broke out, Kagan remains optimistic. “At work, I don’t think there is any expression other than solidarity among colleagues. Jensen (Huang) was the first CEO to express explicit support for the State of Israel in everything regarding the war in Gaza. One of our employees, Avinatan Or, was abducted from the party in Reem by Hamas, together with his girlfriend (Noa Argamani). I cope with these difficulties on a personal level.” Nnvidia, Kagan says, is helping the Or family. Among other things, in January the company held a show of support for the employee’s family, and its employees have supported the family since October 7.

Do you have to cope with criticism of this very support for Israel?

“On a business level, no. But on a personal level, people come and meet with me and ask.”

Has the extensive call up of reserve soldiers affected the company’s activities in Israel?

“Besides supporting employees, the company has its targets and so far we haven’t missed any milestones. At the same time, we help people deal with difficult situations. We pay special attention to reservists’ families, and we provide support to reservists who return from fighting in Gaza. It’s not easy to go to war and come back.”

What tip would you give young entrepreneurs planning to found a startup in Israel?

“Don’t be tied to the world tin the past. Work hard, realize your vision and do wonderful things. If you believe in the vision and the potential, ignore the background noise that will try to weaken your hand and tell you that it is not possible. This happened to us many times at Mellanox, especially at the beginning of the journey. The secret of the company’s success was persisting with the long-term vision.”

Published by Globes, Israel business news – en.globes.co.il – on April 21, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.




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