- Tech giant Nvidia faces a class-action suit alleging it underdeclared its revenues from GPU (Graphics Processing Unit) sales tied to crypto mining.
- The case is underway in the Northern District of California.
US District Judge Haywood Gilliam, Jr. certified on Wednesday a class suit identifying Nvidia and its CEO, Jensen Huang, as defendants. The case stemmed from their alleged concealment of the business’s actual income from crypto-mining-related GPU sales between 2017 and 2018.
What the Nvidia Class Suit is All About
The lawsuit claimed that Nvidia misled investors by mixing its crypto-mining-related earnings with its gaming-related revenues. The plaintiffs highlighted that the business collected more than $1 billion in revenue from GPU sales for crypto mining.
However, Nvidia consistently downplayed demand for its GPUs in crypto mining, leading investors to believe that the boost in its revenues was primarily due to rising GPU demand from gamers. The plaintiffs presented excerpts from Huang’s previous interviews and internal emails from his colleagues as evidence of their deliberate efforts to confuse the public.
The same incident notably led the US Securities and Exchange Commission (SEC) to slap the company with a $5.5 million fine in 2022 for hiding the extent of its crypto mining hardware sales.
How It Orchestrated the Fraud
The complainants argued that Nvidia divided its business into five market segments during the period stated in the lawsuit. Two of which were material to the case, namely its Gaming and Original Equipment Manufacturer & IP (OEM) segments.
The former covered chips and GeForce GPU sales. The latter delved into chips for portable devices, such as tablets and phones.
The plaintiffs recalled that Gaming revenues had regularly outpaced the combined revenues of the four other segments across the timeframe. The ballooning sales coincided with rising crypto prices, primarily led by the pre-merge Ethereum (ETH), which skyrocketed from $400 in June 2017 to over $1,400 in January 2018.
However, Nvidia officials, including Huang, consistently linked crypto-related GPU sales to the OEM segment to make the numbers appear minuscule compared to its Gaming-related sales. The plaintiffs also alleged the act made it appear that the tech giant’s crypto-mining OEM sales were distinct from its Gaming business.
The cover-up began to unravel when Gaming sales declined as the crypto market entered a deep correction, leaving crypto mining either unprofitable or operating at a tight margin. As used GPUs from miner sell-offs flooded the market, resulting in an inventory glut, Nvidia GPU demand declined sharply.
Huang eventually made the mistake of attributing the slack in Gaming GPU sales to a “crypto hangover.” The public connected the dots later, and it became apparent that Nvidia mixed its crypto-mining-related GPU sales with Gaming GPU sales.
Nvidia’s stock soon fell by 28.5% following its November 2018 disclosure, leaving investors livid that the company had misled them into believing it was shielded from crypto market volatility.
The latest development positions the parties for a full-blown trial, with a case conference due for April 21 to discuss trial scheduling and pre-trial deadlines.
