A U.S. district court has allowed a class action lawsuit against Nvidia and CEO Jensen Huang to proceed following investor claims that over $1 billion of the company’s crypto revenue was actually hidden in its gaming offering.
The tech giant also failed to prove that its statements on crypto mining revenue did not affect the firm’s stock price.
Misleading Statements
A recent filing suggests that during the 2017-2018 crypto boom, Nvidia misled investors into believing they were purchasing its gaming GPUs, whereas these sales were primarily connected to the crypto market. When crypto prices plummeted, Nvidia was left with unsold inventory, resulting in a sharp fall in its stock price.
Plaintiffs filed a lawsuit in 2018, claiming Nvidia had concealed around $1.3 billion of total revenue from these transactions while Jensen Huang downplayed the actual demand for crypto-related products. At the time, Huang insisted that the gaming division was the core of the business, and crypto merely provided “an extra bit of juice.”
Moreover, the company launched a special crypto SKU chip, with its sales reported under the mining revenue segment, which plaintiffs allege was misleading to investors.
Nvidia’s defense argued that such statements were not intended to deceive investors; however, Judge Gilliam Jr. pointed a finger at an internal email from an executive indicating that the firm’s stock price remained elevated due to those disclosures.
“They expressed the view that its stock price remained high because of those earlier statements, and the court cannot conclude that there was no price impact in the face of such evidence.”
Consequently, the court permitted the class action to progress, scheduling a hearing for April 21.
NVIDIA’s Stock Decline
Things shifted in 2018 as the crypto market began to decline. In August, Nvidia announced a decrease in revenue and acknowledged that miners had been purchasing its gaming GPUs, leading to a 4.9% drop in its stock price. Further announcements regarding decreasing crypto demand resulted in the stock nosediving by 28.5% over two trading sessions.
Meanwhile, the SEC imposed a $5.5 million fine on Nvidia for failing to inform investors how crypto mining impacted their overall revenue, insisting that the company should have disclosed that most GPU demand was from miners.
