Court Clears Nvidia Class Action Over Crypto Revenue

TLDR

• A U.S. district court allowed a class action lawsuit against Nvidia and CEO Jensen Huang to proceed.
• Investors allege that Nvidia concealed over $1 billion in crypto-related revenue within its gaming segment.
• The court found that Nvidia failed to prove its statements had no impact on its stock price.
• Plaintiffs claim the company did not disclose about $1.3 billion in crypto-driven GPU sales.
• An internal company email suggested that earlier public statements supported Nvidia’s stock price.

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A federal judge has allowed a securities class action against Nvidia and its chief executive to move forward. Investors claim the company concealed over $1 billion in crypto-related revenue within its gaming segment. The court found that Nvidia failed to show that the disputed statements did not affect its stock price.

Nvidia Faces Investor Claims Over Crypto Sales Disclosure

Judge Edward Gilliam Jr. permitted the lawsuit to proceed after reviewing evidence from both sides. Plaintiffs allege that Nvidia misrepresented crypto-driven GPU sales during the 2017 and 2018 boom. They claim the company blended mining revenue into gaming results and misled shareholders.

Investors filed the lawsuit in 2018 and cited about $1.3 billion in undisclosed crypto revenue. They argue that CEO Jensen Huang downplayed mining demand in public statements. Huang said crypto demand was “small” and described it as “an extra bit of juice.”

The complaint states that Nvidia introduced a dedicated crypto mining chip during that period. The company reported those chip sales under its mining revenue category. Plaintiffs argue that this move separated mining figures while gaming revenue still included miner purchases.

Nvidia argued that its statements did not aim to influence investors or stock prices. However, the court cited an internal email from a company executive. The email suggested the stock price remained high because of earlier public statements.

Judge Gilliam wrote that the court could not find “no price impact” given that evidence. Therefore, he ruled that the case could continue. The court scheduled a hearing for April 21.

Revenue Cuts and Stock Declines Follow Market Shift

The crypto market weakened in 2018 and reduced demand for mining hardware. In August, Nvidia lowered its revenue forecast and acknowledged miner purchases of gaming GPUs. The company also reported that inventory had increased by 36%.

Following that announcement, Nvidia’s stock fell by 4.9%. The company later issued another revenue cut and linked it to falling crypto demand. These disclosures triggered further market reaction.

During that period, Chief Financial Officer Colette Kress addressed revenue shortfalls. She said gaming revenue missed expectations because of excess inventory. Over the next two trading sessions, Nvidia’s stock declined by 28.5%.

Regulators had already examined the company’s disclosures before this ruling. The U.S. Securities and Exchange Commission fined Nvidia $5.5 million. The agency said the company failed to inform investors that most GPU demand came from miners.

The SEC stated that Nvidia did not properly disclose the impact of crypto mining on general revenue. As a result, regulators imposed the $5.5 million penalty. The class action will now proceed toward the April 21 hearing date.

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