Nvidia Class Action Lawsuit Over Crypto Mining Revenue Disclosures Moves Forward

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• Nvidia faces certified class action over crypto-related revenue disclosures.
• Investors allege over $1 billion in hidden GPU sales tied to crypto mining.
• Judge ruled disclosures may have impacted stock price, allowing case to proceed.
• Stock dropped 28.5% following November 2018 disclosures.
• Case covers investors from Aug 10, 2017, to Nov 15, 2018.

Class Action Certified in Federal Court

A federal judge has certified a class of investors alleging that Nvidia and its CEO, Jensen Huang, concealed the extent to which the company’s gaming GPU revenues depended on crypto mining-related sales between 2017 and 2018. The ruling, issued by Judge Haywood S. Gilliam Jr. in California federal court, allows investors to pursue their claims collectively as the case moves toward trial.

Allegations of Undisclosed Crypto Revenue: Investors first filed the lawsuit in 2018, claiming Nvidia concealed more than $1 billion in GPU sales tied to crypto mining. The complaint also alleges that Huang downplayed the scale of crypto-related demand. Plaintiffs argue that a significant portion of crypto-driven revenue flowed through Nvidia’s GeForce gaming GPUs and was recorded within the company’s gaming segment, exposing it to volatility linked to crypto market cycles.

Court Findings on Stock Price Impact: Nvidia argued that its disclosures regarding crypto mining revenue did not impact its stock price. However, the court found that the company failed to demonstrate a lack of price impact. The ruling cited an internal email from an Nvidia vice president, which suggested that the company’s stock price remained elevated due to earlier statements. The court stated it could not conclude there was no price impact given such evidence.

2018 Disclosures and Market Reaction

Plaintiffs pointed to key disclosures in 2018 that revealed Nvidia’s exposure to crypto mining demand. In August 2018, the company cut guidance, acknowledged excess inventory, and noted a decline in crypto demand.

Further details emerged on November 15, 2018, when CFO Colette Kress stated that gaming performance fell short of expectations due to post-crypto inventory and slower price normalization following a sharp drop in crypto demand. Following this disclosure, Nvidia’s stock declined approximately 28.5% over the next two trading sessions.

Regulatory Action and Company Position: In 2022, the U.S. Securities and Exchange Commission fined Nvidia $5.5 million for failing to disclose the impact of crypto mining on its business. Nvidia has maintained that crypto mining represented only a small portion of its business and that mining-related sales were tracked separately from its core gaming division. The company also stated it had control over its supply chain and inventory levels.

Legal Timeline and Next Steps: The case was initially dismissed in 2021 but later revived on appeal and survived a failed bid by Nvidia to bring the matter before the Supreme Court. With class certification now granted, the case will proceed toward trial. The certified class includes investors who purchased Nvidia stock between August 10, 2017, and November 15, 2018. A case management conference is scheduled for April 21, where the court will outline the next steps in the proceedings.