Court Advances NVIDIA Lawsuit Over Hidden Mining Revenue

TLDR

• A U.S. federal court allowed a class action lawsuit against NVIDIA and CEO Jensen Huang to proceed.
• Investors allege that NVIDIA failed to clearly disclose over $1 billion in crypto mining GPU revenue.
• Court filings estimate that NVIDIA generated about $1.7 billion from crypto mining GPU sales during the class period.
• Plaintiffs claim that more than 65% of crypto demand involved GeForce gaming GPUs.
• NVIDIA shares fell about 28.5% in two trading sessions after the company lowered its outlook in 2018.

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A U.S. federal court has allowed a securities class action against NVIDIA and CEO Jensen Huang to proceed. Plaintiffs allege the company concealed over $1 billion in crypto mining GPU revenue. The case covers investor losses between August 10, 2017, and November 15, 2018.

Court Clears Investor Lawsuit Against NVIDIA

The court permitted investors to pursue claims that NVIDIA misrepresented crypto-related GPU sales. Plaintiffs argue the company recorded large mining revenue under its gaming division. They state that this reporting created a false picture of steady gaming demand.

Court filings estimate NVIDIA generated about $1.7 billion from crypto mining GPU sales. Of that amount, roughly $1.13 billion allegedly lacked clear disclosure. Investors claim this omission distorted revenue trends and influenced market expectations.

Filings show that over 65% of crypto demand targeted GeForce gaming GPUs. Plaintiffs assert that miners drove much of the gaming segment’s reported growth. They also claim crypto demand fueled about 83% of overall GPU growth during the period.

The judge rejected NVIDIA’s argument that its disclosures had no price impact. The ruling states the company failed to disprove investor claims at this stage. As a result, the court allowed the case to move forward as a class action.

Revenue Disclosure Dispute and Market Reaction

The dispute centers on statements NVIDIA made about gaming revenue trends. Investors allege the company did not clearly separate crypto-driven sales. They argue that this practice masked the volatility of mining demand.

In August 2018, NVIDIA lowered its financial outlook and cited slowing crypto demand. Then, on November 15, 2018, the company reported weaker gaming revenue. It attributed the shortfall to excess inventory after the crypto market declined.

Following that disclosure, NVIDIA shares fell about 28.5% in two trading sessions. Plaintiffs claim the drop reflected the market’s reassessment of prior revenue disclosures. The court noted that the timing supports the investors’ claims.

A hearing in the case is scheduled for April 21. The proceedings will address arguments on liability and damages. The court will determine the next steps after reviewing further submissions.

In 2022, the U.S. Securities and Exchange Commission fined NVIDIA $5.5 million. Regulators said the company failed to disclose that crypto mining affected gaming revenue. The SEC stated that investors needed clear information about revenue sources.

NVIDIA resolved the SEC charges without admitting or denying the findings. The regulator said the omission violated disclosure requirements. The company paid the $5.5 million penalty as part of the settlement.

Recent market data shows NVIDIA stock trading near $178.68. Shares have declined about 9% over the past month. The class period in the lawsuit ends on November 15, 2018.

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