TLDR:
- A federal court certified a class action covering Nvidia investors between August 10, 2017, and November 15, 2018.
- Plaintiffs allege Nvidia hid over $1 billion in crypto-related GPU sales within its gaming revenue segment.
- Nvidia’s stock dropped nearly 28.5% in two sessions after CFO Colette Kress disclosed crypto inventory issues.
- The SEC previously fined Nvidia $5.5 million in 2022 for failing to disclose crypto mining’s effect on revenue.
Nvidia now faces a certified class action lawsuit tied to alleged crypto mining revenue concealment. A U.S. federal court ruled Wednesday that investors may pursue the case as a group.
The lawsuit covers shareholders who purchased Nvidia stock between August 10, 2017, and November 15, 2018. Plaintiffs allege the company hid over $1 billion in crypto-linked GPU sales within its gaming segment. A case conference is now set for April 21.
Court Rules Against Nvidia on Price Impact
Judge Haywood S. Gilliam Jr. of California federal court issued the ruling on Wednesday. He found that Nvidia failed to prove its disclosures had no effect on its stock price.
An internal email from an Nvidia vice president played a key role in the decision. The executive reportedly expressed the view that the stock remained high because of earlier statements.
The court stated it could not conclude there was “no price impact in the face of such evidence.” This ruling allows the certified class of investors to move the case forward together.
Nvidia had previously argued that crypto mining accounted for only a small part of its business. The company also claimed most mining-related sales were tracked separately from its gaming division.
However, plaintiffs alleged that a large share of crypto-driven revenue flowed through GeForce gaming GPUs. Most of that revenue was reportedly recorded within Nvidia’s gaming segment.
This exposed the company to volatility tied to crypto market cycles, according to the complaint. The court found that argument persuasive enough to allow the case to proceed.
In 2022, the SEC separately fined Nvidia $5.5 million for failing to disclose crypto mining’s effect on its business. After a 2021 dismissal, the investor lawsuit was later revived on appeal. It also survived a failed bid at the Supreme Court. The case now advances as a certified class action.
Crypto Exposure and the Road to Trial
Nvidia’s crypto exposure became clearer through a series of disclosures made during 2018. In August, the company cut guidance, acknowledged excess inventory, and noted that crypto demand had dropped.
Then on November 15, 2018, CFO Colette Kress said gaming revenue was “short of expectations as post crypto channel inventory took longer than expected to sell through.” She added that gaming card prices “took longer than expected to normalize” following the “sharp crypto falloff.”
Following the November disclosure, Nvidia’s stock dropped approximately 28.5% over the next two trading sessions. Plaintiffs identified that date as the point when the company’s exposure became fully apparent to investors.
Those events form a central part of the timeline presented in the class action. Shareholders who bought Nvidia stock before that period are covered under the suit.
Class certification allows investors to pursue the case as a group rather than individually. It does not determine whether Nvidia is liable for any wrongdoing.
However, it marks a meaningful step toward a potential trial. The April 21 conference will allow the judge to outline the next procedural steps.
Renz Chong, CEO of modular on-chain platform Sovrun, noted the ruling sends a clear message. He said courts will not accept “segment-level reporting as a shield” when revenue carries a different risk profile than what investors are told.
Chong added that companies must “get ahead of the disclosure gap now, or litigate it later.” He warned that when markets correct, regulators will examine “what management knew, when they knew it, and what they told the public.”
