The SEC just announced today the charges and a financial settlement with Nvidia over its GPU sales to crypto miners. The charge is relatively clear, it simply states that Nvidia misled investors by reporting a huge increase in “gaming” related revenue in 2018 actually hiding how much of that increase was actually based on the mining market.
It’s worth noting that Nvidia has agreed to pay a $5.5 million fine to close this case but is not admitting any wrongdoing as part of the settlement. This move to terminate a lawsuit is relatively common in the US. However, it confirms that Nvidia deliberately concealed from investors the weight of mining in its graphics card sales figures when many voices were raised to point out that the emerging GPU shortage was likely related to mining.
Card sales to miners counted as a gaming boom by Nvidia?
In its order, the SEC states that “The company’s dedicated sales staff, particularly in China, reported what they believed to be a significant increase in demand for gaming GPUs due to crypto mining.” For the SEC the willingness to hide this reality made it more risky for investors who, based on Nvidia’s communications, might have thought the sales growth was a reliable trend.
“NVIDIA analysts and investors were interested in understanding the extent to which the company’s gaming-related revenue was impacted by mining and regularly asked senior management to what extent the increase in gaming revenue during this period was due to crypto mining.” However, in 2018 a crypto crash confirmed investors’ concerns as alongside this event, Nvidia immediately cut its quarterly profit projections by $500 million. A situation that triggered legal action by shareholders. “NVIDIA’s disclosure failures have deprived investors of critical information to evaluate the company’s activities in a key market,” said Kristina Littman, head of the Crypto Assets and Cyber Unit at the SEC Enforcement Division. “All issuers, including those pursuing opportunities involving emerging technologies, must ensure that their disclosures are timely, complete and accurate.” On balance this fine remains a drop in the bucket for Nvidia and closes a proceeding that could have left more of a mark on the company’s image.