Simply put
- Nvidia is currently involved in a class action lawsuit related to its disclosures about cryptocurrency revenue.
- The lawsuit claims that Nvidia concealed over $1 billion in GPU sales tied to cryptocurrency.
- This court ruling permits investors to advance their claims together as the trial moves forward.
A federal judge has found a group of investors alleging that Nvidia and its CEO, Jensen Huang, hid how much the company’s gaming GPU revenue was linked to crypto mining between 2017 and 2018.
One report mentions Nvidia’s failure to demonstrate that its statements regarding crypto mining revenue didn’t impact its stock price. This order was issued by Judge Haywood S. Gilliam Jr. in federal court in California.
Investors initially sued Nvidia in 2018, claiming the company had downplayed the extent of GPU sales related to crypto mining—rumored to exceed $1 billion. Moreover, in 2022, the SEC fined Nvidia $5.5 million for not revealing how cryptocurrency mining influenced its business.
Nvidia insists that crypto mining accounts for a small segment of its operations, and most of its mining sales are recorded apart from its primary gaming sector.
The company also claims to have its supply chain under control and is prepared to manage any excess graphics card stock without issues.
However, the plaintiffs argue that a substantial part of the revenue from crypto comes through Nvidia’s GeForce gaming GPUs, with much of this revenue being recorded within the gaming division, leaving the company vulnerable to fluctuations linked to crypto market trends.
The court highlighted an internal email from an Nvidia vice president that suggested the stock price remained elevated due to earlier statements. Judge Gilliam Jr. noted that the evidence didn’t allow for a conclusion that no price impact existed.
Nvidia’s Cryptocurrency Exposure
The plaintiffs reference disclosures from 2018 that first indicated this exposure. In August of that year, Nvidia adjusted its guidance, acknowledged an overstock, and mentioned a reduction in cryptocurrency demand.
This was elaborated on November 15, 2018, when Nvidia’s CFO, Colette Kress, stated that games performed below expectations due to inventory issues stemming from the crypto sector. A cited statement noted that prices for gaming cards took longer than anticipated to return to normal following a significant dip in cryptocurrencies.
These remarks are alleged to mark the moment the company’s exposure became apparent, leading to a roughly 28.5% drop in stock price within the following two trading days after the November announcement.
Nvidia has been approached for comments regarding how these internal communications may have influenced discussions on price impact and whether they plan to contest the lawsuit further.
After being dismissed in 2021, the case was revived on appeal. Nvidia’s attempt to reach the Supreme Court was unsuccessful, and now it progresses as a certified class action suit.
This class certification allows investors to pursue legal action collectively, rather than as individuals. While it doesn’t determine Nvidia’s liability, it brings the case one step closer to trial.
Obtaining this certification sends a message to all companies involved with crypto and AI: courts will not accept segment-specific reporting if what’s driving revenue differs significantly from the risk profile shared with investors, stated Lenz Chong, CEO of Sovrun. He noted that companies need to address disclosure gaps proactively.
Chong emphasized that the guiding principle is clear: when the market inevitably corrects, the first inquiries will center on what management knew, when they knew it, and how they communicated that to the public. Companies that act sooner will be in a much stronger position than those who wait for legal scrutiny.
This certified class applies to investors who purchased Nvidia stock between August 10, 2017, and November 15, 2018. A case conference is upcoming on April 21, during which the judge will outline the next steps.
Editor’s note: Added comment from Chong
