What to know:
- US court allows Nvidia’s lawsuit over undisclosed crypto mining GPU revenue claims.
- Investors allege Nvidia hid $1.13B in crypto-linked sales within the gaming segment.
- Nvidia shares fell sharply in 2018 after a crypto demand drop revealed exposure.
The US federal court has allowed the class-action lawsuit against Nvidia and its CEO Jensen Huang to proceed. The lawsuit was filed on the claims that Nvidia did not disclose its revenue derived from the activities of cryptocurrency mining.
The lawsuit involves investors between August 10, 2017, and November 15, 2018. The plaintiffs claim that the chipmaker disclosed substantial crypto-related GPU sales under its gaming segment, but this concealed the true source of the sales.
Nvidia Accused of Hiding $1.13B in Crypto-Linked GPU Sales
Court filings indicate that the company raised about $1.7 billion in revenue from the sale of GPUs used in crypto mining. Of this figure, about $1.13 billion in revenue was not transparently disclosed to investors.
The court documents also show that the company derived more than 65% of the crypto mining demand from GeForce gaming GPUs. This suggests that the crypto mining business contributed to the growth of the gaming segment.
In addition, crypto demand could have contributed to 83% of the total growth of Nvidia. The plaintiffs claim that this level of exposure was not properly communicated. They claim that investors were not aware of the risks associated with crypto.
The problem began to emerge in 2018 with the decline in crypto demand. In August 2018, the firm announced that it had to lower its outlook due to weakening crypto-related sales. This began to change the growth pattern of the company.
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Nvidia announced on November 15, 2018, that its gaming revenues did not meet investors’ expectations. This was attributed to inventory levels resulting from the crypto slowdown. This announcement prompted investors’ concerns.
Nvidia Shares Slide 28.5% Amid Crypto Exposure Concerns
Nvidia shares dropped by about 28.5% in two trading sessions after the announcement. Investors claim that the shares fell due to the delayed realization of exposure to cryptocurrency. The court also noted that the company was unable to prove that its statements had no impact on stock prices.
Based on this, the judge has allowed the case to proceed as a class action. A hearing has also been scheduled for April 21. The legal process will thus remain active.
The chipmaker has faced similar issues in the past. The US Securities Exchange Commission fined Nvidia $5.5 million in 2022. The company was accused of not making clear disclosures regarding the contribution of crypto mining to its gaming revenue.
The SEC said that investors should have been aware of this source of demand. The case put more pressure on the company in terms of regulations. It also raised concerns about the disclosure practices.
According to Yahoo Finance data, the stock of Nvidia has dropped by about 8.63% over the past month. Its shares are currently trading around $178.68. Investors are keeping a close eye on the case.
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