Israel’s VCs see opportunity for challengers in Nvidia’s turmoil

Nvidia's former chief once called Israel the company's second home, and the relationship runs deep. He drove the $6.9 billion Mellanox acquisition in 2019, turned it into Nvidia's largest R&D base outside the US, and the company planned a multibillion-dollar campus in northern Israel. Nvidia employs about 6,000 people there.

So the resignation lands as a local economic question, not just a Silicon Valley drama. Will a new leader stay as committed to Israel? And does a weaker Nvidia give the country's chip and inference startups room to grow?

Our read is that the Israeli investors quoted by TechCrunch are being refreshingly realistic. Nobody is predicting Nvidia's fall. Selah Ventures' Adi Levanon says the departure does not dismantle the company's technology or ecosystem, and that challengers now have a window to prove better economics, while warning that leadership change alone won't win the business. That is the right framing. Customers buy chips on performance, software and supply, not on headlines.

Vertex Ventures Israel's Yanai Oron adds the sharper point. Slower decisions at Nvidia could open doors for competitors, but if uncertainty also slows AI spending, challengers could win a bigger share of a smaller market. That is the tension I'm watching. Nvidia has funded a huge share of the industry's spending, investing across companies and its own next-generation chips. If that engine stalls, the whole sector feels it, including the startups hoping to replace it.

We think a less dominant Nvidia is probably healthy for AI over time. One supplier with near-total control of training and inference hardware is a single point of failure, as this month has shown. The demand from AI agents running real workloads is pulling money into AI-specific chips and inference software, and more competition there should mean better prices and more options for builders. That is a good outcome, if it arrives through better products rather than a market chilled by chaos.

For Israel specifically, there is real exposure. The reporting notes that interim CEO Colette Kress said in 2023 that as CFO she started her days with Israel meetings, which has reassured some observers. Two Israelis, Apple's Johny Srouji and Nvidia's Michael Kagan, appear among the names floated for the permanent role, though not at the top of a tentative list. Whoever gets the job will likely hold less sway over the company and the industry than the founder did, and that could cut either way for the country's tech sector.

The downside scenario is a new leader who rationalizes overseas R&D and slows the northern campus. The upside is a more competitive chip market in which Israeli engineering talent has more than one giant to work for. Both are possible, and the next few months of decisions will tell us which way it is heading.

Intel, Microsoft and many local startups also run large R&D operations in Israel. The country's economic forecasts have been boosted in recent years by Nvidia's presence, which is why the succession is being watched closely there.