NVIDIA Faces Class Action as Court Approves $1 Billion Crypto-Mining Revenue Claims

NVIDIA Faces Class Action as Court Approves $1 Billion Crypto-Mining Revenue Claims – Stock Drops 7%

NVIDIA’s stock, identified by the ticker NVDA, experienced a 7% decline on Thursday after a federal judge in the United States permitted an investor lawsuit to move forward as a class action. The lawsuit revives claims that NVIDIA and its CEO, Jensen Huang, concealed more than $1 billion in revenue from graphics card sales tied to cryptocurrency mining.

Key Takeaways

NVIDIA’s stock fell 7% after a class action lawsuit was allowed to proceed over claims of hidden crypto-mining revenue.
The lawsuit alleges that NVIDIA misleadingly reported gaming revenue while downplaying sales from cryptocurrency miners.
Independent analyses suggest that undisclosed crypto GPU revenue could exceed $1.3 billion.
NVIDIA asserts that mining contributed minimally to its business; however, regulatory challenges have previously resulted in fines for disclosure issues.
The lawsuit’s approval could have significant implications for NVIDIA’s financial outlook and stock performance.

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Allegations Against NVIDIA Regarding $1 Billion in Crypto Sales

The legal action, first initiated in 2018, claims that NVIDIA misled its shareholders by attributing skyrocketing revenue primarily to gaming demand while downplaying the significant contributions made by cryptocurrency miners. Plaintiffs assert that the company directed orders from miners through its consumer GeForce gaming cards instead of categorizing them under specialized crypto product lines, giving a false impression of organic growth in the gaming sector.

Internal documents and testimony revealed during court proceedings indicate that independent evaluations estimated undisclosed crypto-related GPU revenue to be between $1.1 billion and $1.35 billion, significantly higher than what NVIDIA publicly acknowledged at the time.

In the court papers, one insider, referred to as “FE 1,” described how the company monitored purchases from miners, while another insider, “FE 2,” stated that Huang was present at sales meetings where discussions about revenue impacts driven by crypto demand took place. Plaintiffs argue that these testimonials, along with internal records, demonstrate NVIDIA's awareness of robust miner demand, which was downplayed in public statements.

Class Action Approved Despite NVIDIA's Defense

NVIDIA has consistently argued that cryptocurrency mining constituted only a small portion of its overall business and that its exposure to mining largely stemmed from specific Crypto SKUs within its OEM segment. The company’s defense also received support from industry associations. In August 2024, the Digital Chamber of Commerce filed a brief to the U.S. Supreme Court, urging reversal of a Ninth Circuit decision that partially revived the case.

The company has faced previous sanctions from regulators over related disclosure matters. In 2022, the Securities and Exchange Commission (SEC) imposed a $5.5 million fine on NVIDIA and issued a cease-and-desist order due to the company’s failure to fully disclose the impact of crypto-mining demand on its results for fiscal year 2018.

Despite reaching a settlement, the plaintiffs contend that the recently uncovered internal emails and testimonies bolster their claims that NVIDIA’s public statements significantly misrepresented the factors driving its 2018 revenue.

The alleged concealment led to notable market repercussions: when cryptocurrency prices plummeted in late 2018, leading to a drop in miner demand, NVIDIA drastically revised its revenue guidance due to excess inventory and reduced orders from miners. This stock plunge over two trading days triggered the investor lawsuit now approved as a class action by Judge Haywood S. Gilliam Jr. He made this ruling after NVIDIA was unable to prove that its statements did not affect its stock price.

Court documents also revealed an internal email from a senior vice president suggesting that NVIDIA’s stock valuation remained high due to the company’s public reassurances—an element the plaintiffs cite as evidence of market impact.

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As of the latest update, NVDA is trading at $172, marking an almost 18% drop from its all-time peak of $212 reached in October of the previous year.