The U.S. government, along with the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), is supporting investors in a lawsuit against Nvidia and the case is scheduled to be heard by the Supreme Court on November 13, 2024.
Investors are accusing Nvidia and its CEO, Jensen Huang, of misleading them about the company’s reliance on revenue from cryptocurrency mining before the market crash in 2018.
Investors claim that Nvidia provided false or misleading information about its earnings from cryptocurrency, leading to financial losses when the market collapsed. The DOJ and SEC have submitted a document supporting the investors, emphasizing the need to interpret securities laws correctly.
Nvidia, on the other hand, argues that the investors are using flawed data, and the company believes the previous court decision weakens protections against unnecessary or exaggerated lawsuits.
Nvidia became involved in the cryptocurrency industry mainly through its powerful graphics processing units (GPUs), which became important tools for mining cryptocurrencies. Here’s a simple summary of Nvidia’s journey in the crypto space:
Nvidia’s GPUs, especially from the RTX series, became popular among crypto miners because of their strong computing power, which made them great for solving the complex problems needed for mining. As a result, the demand for Nvidia’s gaming GPUs grew rapidly during the cryptocurrency boom.
In March 2021, Nvidia created a special product for crypto mining, called Cryptocurrency Mining Processors (CMP). These chips were designed specifically for mining Ethereum and were meant to keep gaming GPUs available for gamers while also meeting the demand from miners.
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However, Nvidia ran into trouble with regulators when the SEC fined the company $5.5 million in 2022 for not telling investors how much of its revenue came from crypto mining during 2017 and 2018.
In 2017, there was a big increase in demand for graphics chips, partly because of the popularity of cryptocurrency. This made Nvidia earn a lot more money at first. But the good times didn’t last long.
The next year, the company lowered its sales expectations, and the numbers were lower than what experts had predicted. Because of this, investors lost confidence and sold off the company’s stock, causing its value to drop by 20% in just two days.
