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A group of investors charged US-based GPU maker Nvidia with making false statements about its inventory of graphic processing units (GPUs). However, US District Judge Haywood S. Gilliam Jr. threw out the suit yesterday, citing inconclusive arguments against the tech firm.
Judge Concludes Stakeholders Donât Have Enough Arguments
The US judge concluded that Nvidiaâs revolted investors couldnât prove that the company had knowingly released false information regarding its stock of GPUs, which are used for developing computer graphics in video games as well as for mining cryptocurrencies.
The plaintiffsâ charges were based on the findings of blockchain consultancy firm Prysm Group. However, the judge said that Prysm hadnât provided many details that could prove that the data used in its report analyzing Nvidiaâs financial statements were reliable.
Besides the conclusions from the Prysmâs report, Judge Gilliam also found that investors insisted their arguments were based on Nvidiaâs partial corrective disclosures to a stock price decline of about 30%, demonstrating that the tech firm caused the investorsâ financial losses.
The judge said that plaintiffs were directly tying the âAugust and November statements puncturing these allegedly misleading impressions to their loss.â He explained:
Plaintiffs allege that the market had been pointedly concerned about the risk of whether crypto-mining was truly behind the surge in NVIDIAâs gaming revenues, or only accounted for âsome residual amount or some small amount,â as stated by Defendants. Investors and analysts asked about these concerns, and Defendants made statements that created the impressions noted above.
While Judge Gilliam trimmed the suit, he gave investors the chance to amend their complaint.
It All Goes Back to Nvidiaâs Expansion Into Crypto MiningÂ
Nvidiaâs shareholders started to file suits against the company in December 2018, after it reported disappointing revenue and saw a 29% decline in the stock price.
The suits show that investors were not satisfied that Nvidia started to expand its GPU production for the crypto space at the expense of the gaming market. As per the lawsuit, the US tech firm experienced an âunusual problemâ in early 2017 when its flagship GPU called GeForce was sold en masse to crypto miners rather than gamers.
In light of this, Nvidia launched a new chip designed specifically for cryptocurrency mining, known as Crypto SKU. The company recorded the Crypto SKU sales separately from its gaming segment, which comprised the recordings of GeForce sales.
Nevertheless, miners still preferred the GeForce chip, which caused Nvidiaâs gaming revenue to surge. The company executives mistakenly attributed the increase in sales to higher demand form gamers while informing analysts that most of the crypto mining-related sales are generated by the Crypto SKU.
Ultimately, the gaming segment started to shake in early 2018, when the crypto market departed from its all-time highs. However, Nvidia admitted that its crypto revenues were related to the gaming segment only August 2018, the plaintiffs claim.
Three months later, the GPU maker said that revenue was expected to drop over 7% in the fourth quarter of 2018, which led to a stock price decline of 30%.
How Is Nvidia Doing Today?
Nvidia suffered from the crypto market crash, but the stock price eventually bounced back, as the crypto industry returned to growth. The companyâs share price hit an all-time high in February this year after it reported a 41% surge in revenue.
Nvidia stock price
However, the coronavirus outbreak that started in China ruined the companyâs potential growth.
Recently, the company called everyone to join its cause and fight the pandemic. The tech firm launched the âFolding@homeâ initiative via Reddit. Nvidia is calling PC users to contribute their unused computing resources to fund research related to COVID-19.
PC Gamers, letâs put those GPUs to work.
Join us and our friends at @OfficialPCMR in supporting folding@home and donating unused GPU computing power to fight against COVID-19!
Learn more â https://t.co/EQE4u7xTZT pic.twitter.com/uO0ZCq8PEv
â NVIDIA GeForce (@NVIDIAGeForce) March 13, 2020
Do you think Nvidia stakeholders should be upset about the companyâs expansion to crypto mining field? Share your thoughts in the comments section!
Images via Shutterstock, Twitter @NVIDIAGeForce, Nvidia trading chart by Tradingview
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