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The lawsuit alleges that Nvidia misrepresented $ 1 billion in sales to Cryptocurrency Miner

May 16, 2020

In an amended class action lawsuit against Nvidia Corp. the company was accused of violating the Exchange Act by downplaying the fact that its gaming earnings depended on GPU sales to cryptocurrency miners.

The complaint, filed on May 14, alleges that Nvidia has intentionally made misleading statements that underestimated more than $ 1 billion in GPU sales related to cryptocurrency miners in 2017 and 2018. The claims assume that sales to Miner accounted for more than half of the company’s total sales.

Nvidia was hit by a number of investor lawsuits after its share price fell nearly 30% after it was announced that sales would decrease 7% in late 2018.

Nvidia is accused of falsifying $ 1 billion in sales

The lawsuit alleges that Nvidia misrepresented $ 1 billion in sales to Cryptocurrency Miner
The lawsuit alleges that Nvidia misrepresented $ 1 billion in sales to Cryptocurrency Miner

The amended lawsuit alleges that the company “misled the market by believing that Nvidia’s reliance on cryptocurrency-related revenue was low,” while incorrectly claiming “sales growth” versus the previous quarter low in the gaming segment it was the result of strong organic demand from the players. “

The document cites a study that estimates that Nvidia’s false statements have hidden sales of $ 1.126 billion to miners. A separate report from RBC Capital Markets, however, found that sales of $ 1.35 billion were obscured by the company.

In 2017, GPU demand rose

In 2017, Nvidia’s GeForce GPU became a favorite of cryptocurrency miners, making huge profits for the company’s gaming division.

In May 2017, Nvidia also released a chip that was specially developed for cryptocurrency mining, the Crypto SKU, whose sales are to be recorded in a “catch-all” business area. However, the crypto SKU could not prevail, and many miners continued to buy GeForce GPUs instead.

The plaintiffs allege that despite the increased demand for crypto miners that fueled the sale of GeForce units, Nvidia attributed demand to players as their earnings contributed to the company’s gaming department.

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Sales of crypto article numbers under-represented the demand of the miners

Investors also claim that Nvidia also claimed that its crypto revenue was low based on the poor performance of its crypto SKU, misleading the market regarding its dependence on sales to crypto markets.

“The defendants refused to publicly acknowledge that NVIDIA’s sales growth was the result of bizarre cryptocurrency miners, so investors did not discount the company’s stock to reflect the volatility of demand related to cryptocurrencies.” Read on request.

Instead, the defendants opted for a strategy that benefited from the strong demand from the miners for GeForce GPUs while falsely telling investors that GeForce’s peak sales came from gamers, not miners. and it turned out that NVIDIA’s core gaming business was immune to volatility in the cryptocurrency markets.

The lawsuit was amended after California federal judge Haywood Gilliam reduced the number of cases in March.

While judge Gilliam found that investors had not knowingly disclosed that Nvidia had provided false information, he found that the plaintiff’s claims adequately linked the 30% decline in the share price to Nvidia’s partial corrective information.

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