Nvidia Corporation Hit with Stockholder Class Action Over Cryptocurrency Market Involvement

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Nvidia Corporation and its CEO and CFO face a proposed class action filed on behalf of stockholders who the suit says were deceived by allegedly misleading statements concerning Nvidia’s involvement in the cryptocurrency market. The case argues in particular that the technology company, which develops graphics processing units (GPUs), falsely assured investors of its ability to navigate the cryptocurrency market and, through these supposedly misleading statements, artificially inflated stock prices while covering up an inevitable decline in cryptocurrency-related sales and the resulting oversupply of gaming card inventory.

When Nvidia entered the “volatile cryptocurrency markets,” the defendants, the lawsuit explains, assured investors that the company’s executives “understood the channel very well” and downplayed Nvidia’s reliance on cryptocurrency-related sales while emphasizing that the “strong demand” for GPUs in the computer gaming market would absorb any decline in cryptocurrency revenue. Based on these assurances, the case continues, Nvidia’s stock began trading at “record highs.”

At the same time, the company’s executives began selling their shares in significant amounts, the suit says, with Nvidia’s CEO, for example, unloading 110,000 personally held shares for over $18 million in profit.

As the demand for GPUs among cryptocurrency miners began to drop, however, Nvidia’s growth was negatively impacted, the case states. Despite representing that the cryptocurrency market was only “a small portion of its business,” Nvidia found itself with over three months of excess inventory due to the drop in demand in the cryptocurrency channel, according to the lawsuit.

In November 2018, the defendants reportedly revealed not only that Nvidia’s revenue would decline by more than seven percent in the fourth quarter, but that it would halt shipping of its mid-range GPUs “for at least an entire quarter.” In response to this news, stock prices sank by 28.5 percent, the case says.

The lawsuit argues that the defendants’ “materially false and misleading statements and omissions” between August 10, 2017 and November 15, 2018 caused stockholders to suffer injury and violated federal securities law.