A statement we received from Nvidia suggests that investors should be happy as shares have still ‘done incredibly well.’
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Nvidia is back in court over whether a significant chunk of its revenue through 2017 and 2018 was reliant on the whims of the cryptocurrency market. Specifically, a class action lawsuit has been given the green light by a U.S federal judge, reports Decrypt . This allows the plaintiffs to move forward with a case alleging Nvidia hid over $1 billion in cryptomining GPU revenue in its gaming segment, reporting over the period. Anyone who bought Nvidia stock between August 10, 2017, and November 15, 2018, is included in the class action.
Nvidia had already been raked over the legal coals and made to pay an SEC fine of $5.5m for not being clear about the scale of the income from its products used in the cryptomining business, back in 2022. After that, Nvidia continued to downplay the scale of GPU demand for crypto. But, pivotally, it hasn’t been able to back up its claims with documentary (accounting) evidence. That’s why Judge Haywood S. Gilliam Jr. certified this new class action on Wednesday in California federal court.
It was previously maintained by Nvidia that crypto mining accounted only for a small part of its business during the period under scrutiny. At that time (and until 2020), the majority of the Green Team’s revenue was traditionally from the PC gaming market. However, the plaintiffs argue that a significant amount of crypto revenue was funneled through gaming GPU sales – and thus recorded as – gaming segment revenue.
You may like Nvidia posts record $215 billion annual revenue in latest quarterly earnings report Gamers face another crushing blow as Nvidia allegedly slashes GPU supply by 20%, leaker claims Super Micro shareholders sue company over securities fraud after AI chip smuggling bust What’s the problem? Risk profiles. Why do investors have an issue over who was buying these GeForce gaming GPUs in 2017-2018? The answer is in risk profiles. At the time, the PC gaming market was a dependable cash cow for Nvidia, and revenue from it should have been far steadier and more predictable than the volatile crypto market. Thus, as the source report notes, Nvidia’s skyrocketing revenues from gaming GPUs were far more driven by crypto than its accounting suggested.
Indeed, in November 2018, Nvidia’s CFO, Colette Kress, stated that gaming card inventory was taking longer to clear and pricing was down after a “sharp crypto falloff.” Nvidia's stock fell nearly 30% in two trading sessions following that disclosure.
“Investors who purchased Nvidia in the 2017-2018 timeframe have done incredibly well, as our corporate strategy unfolded as we consistently predicted,” an Nvidia spokesperson told Tom's Hardware in a statement. “We will address the complaint in court.”
The judge will outline the next steps in this case at a case conference on April 21.
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Key considerations
- Investor positioning can change fast
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Reference reading
- https://www.tomshardware.com/pc-components/gpus/SPONSORED_LINK_URL
- https://www.tomshardware.com/pc-components/gpus/class-action-alleges-nvidia-hid-more-than-usd1b-crypto-gpu-income-within-its-gaming-revenues-investor-lawsuit-concerns-business-spanning-2017-and-2018#main
- https://www.tomshardware.com
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