A federal court in California has given the green light for a class action lawsuit against Nvidia, focusing on how the company reported revenue tied to cryptocurrency mining activities. The decision allows investors who bought Nvidia stock between August 10, 2017 and November 15, 2018 to jointly pursue claims that the tech giant misrepresented over $1 billion in crypto-related sales through its gaming division.
Judge Points To Key Evidence On Price Impact
U.S. District Judge Haywood S. Gilliam Jr. presided over the case and determined Nvidia had not demonstrated that its public statements about crypto exposure were irrelevant to its stock performance. A pivotal role was played by an internal email from an Nvidia executive, where suspicions surfaced that optimistic disclosures had helped sustain the share price at elevated levels.
The court concluded it could not exclude the possibility that Nvidia’s communications had a tangible influence on stock pricing. This opens the path for investors making up the certified class to move forward collectively, rather than engaging in individual lawsuits against the company.
Securities Case With High Profile Figures And SEC Involvement
Nvidia, a leading designer of graphic processing units (GPUs) widely used in the tech and gaming industries, has seen growing demand from both traditional markets and cryptocurrency mining operations. Plaintiffs in the lawsuit contend that the company’s GeForce gaming GPUs were heavily purchased by crypto miners and that the resulting surge in revenue was accounted for within the gaming segment, rather than being separately disclosed.
This argument suggests investors were exposed to risks related to cryptocurrency volatility that may not have been transparent at the time. In 2022, the Securities and Exchange Commission fined Nvidia $5.5 million for not disclosing the full effect of crypto mining on its business, raising further questions about the company’s reporting practices.
The current class action also names CEO Jensen Huang as a defendant, focusing attention on Nvidia’s top leadership. The case was previously dismissed in 2021, but made a return after appeal and even survived an attempt to halt proceedings at the Supreme Court.
As the case progresses, Nvidia maintains its position that cryptocurrency-related sales were a minor component of overall revenue, and that most such transactions were recorded outside the gaming business.
Contrary to these claims, plaintiffs argue the majority of crypto-fueled revenue increases occurred within the gaming division, exposing shareholders to risks that contributed to significant fluctuations in stock value. This became especially apparent after the company’s November 2018 disclosure, when Nvidia shares fell about 28.5 percent in just two trading sessions.
Following the November announcement, Chief Financial Officer Colette Kress commented that gaming revenue fell short of expectations, attributing underperformance to longer-than-anticipated efforts to clear out excess inventory following the “sharp crypto falloff.”
Renz Chong, chief executive of the decentralized platform Sovrun, reflected on the decision in a written comment.
Chong emphasized that courts are less likely to accept “segment-level reporting as a shield” when income sources involve different risk profiles than those voluntarily disclosed to shareholders. He also cautioned that tightening regulatory oversight means companies face increased scrutiny over what was known, when, and how it was communicated to the public.
