Key Takeaways
- On March 25, a federal judge in California granted class certification in an investor lawsuit against Nvidia and its CEO Jensen Huang
- Plaintiffs allege the company concealed more than $1 billion in graphics card sales to cryptocurrency miners, misrepresenting them as gaming revenue between 2017 and 2018
- In 2022, Nvidia settled with the SEC for $5.5 million over inadequate disclosure of crypto mining’s influence on gaming segment sales
- The certified class includes all NVDA shareholders who purchased shares from August 10, 2017 through November 15, 2018
- A case management hearing is scheduled for April 21 through Zoom; shares traded at $174.03, declining 2.5%
Nvidia (NVDA) was trading at $174.03, down 2.50% at the time of writing.
Shares declined following a California federal court decision that brought the extended cryptocurrency revenue litigation significantly closer to reaching trial.
The Foundation of the Legal Challenge
The central accusation is clear-cut: Nvidia communicated to shareholders that its gaming graphics card revenue was expanding because of increased purchases from video game enthusiasts. However, this narrative omitted critical information.
Throughout the 2017 cryptocurrency surge, Ethereum mining operations were purchasing GeForce graphics cards in massive quantities. This demand was silently responsible for a substantial portion of what Nvidia classified as “gaming” revenue.
Quarterly sales surged by 52% followed by 25% year-over-year during these timeframes. The plaintiffs contend that shareholders were completely unaware of how much revenue depended on cryptocurrency activity.
When Bitcoin collapsed in 2018 and mining operations became economically unviable, demand for GPUs plummeted. Gaming segment revenue declined sharply, and the cryptocurrency-fueled basis of the prior growth became unmistakable after the fact.
Nvidia’s own fourth quarter FY2019 earnings discussion compounded the issue. Company executives explicitly attributed the revenue decline to the cryptocurrency mining collapse — a statement that directly conflicted with how they had characterized the earlier expansion.
SEC Enforcement Action Preceded This Lawsuit
The Securities and Exchange Commission acted before this civil case gained momentum. In May 2022, Nvidia agreed to a $5.5 million settlement after regulators determined the company had inadequately disclosed how cryptocurrency mining materially affected gaming GPU sales during the second and third quarters of fiscal 2018.
The commission’s enforcement division stated that Nvidia’s disclosure shortcomings prevented investors from accessing information essential for proper business evaluation.
Nvidia resolved that enforcement action without admitting guilt — a framework that allowed the company to maintain its legal position while essentially confirming the underlying factual claims.
The current civil litigation continues from where the SEC action concluded. The question is no longer whether disclosure failures occurred, but rather who bears financial responsibility.
Plaintiffs further contend that Nvidia personnel were actively monitoring cryptocurrency market movements and linking them to GPU sales performance in real time during those reporting periods. This evidence, they assert, demonstrates that executive-level statements regarding gaming demand were deliberately misleading — not merely incomplete.
On March 25, Judge Haywood Gilliam approved certification for the investor class — encompassing all individuals who purchased NVDA shares between August 10, 2017 and November 15, 2018. This decision is procedural in nature and doesn’t establish whether Nvidia’s disclosures constituted fraud.
A case management conference has been set for April 21 through a publicly accessible Zoom webinar.
Nvidia responded: “Investors who purchased NVIDIA in the 2017-2018 timeframe have done incredibly well, as our corporate strategy unfolded as we consistently predicted. We will address the complaint in court.”
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
