Key Takeaways
- On March 25, a federal judge in California certified a class action lawsuit against Nvidia and its CEO Jensen Huang
- Investors allege the company concealed more than $1 billion in graphics card sales to cryptocurrency miners, attributing the revenue to gamers instead during 2017–2018
- In 2022, Nvidia settled with the SEC for $5.5 million over inadequate disclosure of crypto mining’s influence on gaming segment revenue
- The certified class includes all investors who purchased NVDA stock from August 10, 2017 through November 15, 2018
- NVDA shares were down 2.5% at $174.03; a case management hearing is scheduled for April 21 via Zoom
At the time of publication, Nvidia (NVDA) was trading at $174.03, reflecting a 2.50% decline.
Shares retreated following the California federal court’s decision to advance the lengthy crypto-related revenue dispute toward potential trial.
The Basis of the Investor Allegations
The lawsuit’s central allegation is clear: Nvidia publicly attributed surging gaming GPU sales to increased demand from gamers. But that narrative was incomplete.
Throughout the 2017 cryptocurrency boom, Ethereum miners were purchasing GeForce graphics cards in bulk quantities. This mining-driven demand was silently fueling a substantial portion of what the company classified as “gaming” revenue.
Quarterly results showed year-over-year revenue increases of 52% followed by 25% during this period. The plaintiffs contend that shareholders were kept in the dark about how much of that growth depended on cryptocurrency markets.
When Bitcoin collapsed in 2018 and mining operations became economically unviable, GPU sales plummeted. Gaming segment revenue declined sharply, revealing in retrospect the crypto-dependent nature of the prior expansion.
Nvidia’s Q4 FY2019 earnings call compounded the issue. Management explicitly attributed the revenue decline to the cryptocurrency mining downturn — a statement that directly contradicted how the company had characterized the earlier growth trajectory.
SEC Settlement Preceded Civil Action
Regulators acted before this lawsuit reached its current stage. In May 2022, the SEC announced that Nvidia had agreed to a $5.5 million settlement after investigators determined the company failed to properly disclose how cryptocurrency mining affected gaming GPU sales in fiscal Q2 and Q3 of 2018.
The Commission’s enforcement division stated that Nvidia’s disclosure shortcomings prevented investors from accessing material information necessary for informed investment decisions.
While Nvidia settled without admitting fault — a common arrangement that allows companies to avoid liability admissions while closing regulatory matters — the settlement essentially confirmed the underlying factual allegations.
The private class action now continues where regulatory enforcement 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 connecting them to GPU purchasing patterns in real time throughout those quarters. This internal awareness, they argue, makes executive statements about gaming-driven demand intentionally deceptive — not merely incomplete.
Judge Haywood Gilliam’s March 25 certification of the investor class encompasses anyone who acquired NVDA shares between August 10, 2017 and November 15, 2018. The certification is a procedural milestone and does not adjudicate the merits of the fraud allegations.
A case management conference is set for April 21 and will be accessible via public Zoom webinar.
In response, Nvidia stated: “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.”
