Now, US securities regulators say the graphics card giant Nvidia knew cryptocurrency miners had been eating into sales of cards meant for gaming – and thus potentially contributing to supply issues – but had illegally withheld that fact from investors who repeatedly asked about crypto mining’s impact on Nvidia’s gaming segment.
The SEC’s allegations zero in on Nvidia’s quarterly reports in fiscal year 2018, when graphics cards began being used to mine virtual currencies. As the value of currencies such as Ethereum grew, “some of NVIDIA’s sales personnel expressed their belief that much of the increased demand of the company’s Gaming products, primarily in China, was being driven by cryptomining,” the SEC order said.
Senior executives at the company sought to capitalize on that demand with a specialized line of cards just for cryptomining, the SEC wrote, but Nvidia salespeople and the company’s internal estimates suggested cryptomining was still accounting for “a significant factor in the year-over-year. growth in Gaming revenue. “
In the company’s quarterly reports, Nvidia reported revenue increases of 52% and 25% for the second and third quarters of 2018, respectively, compared to those same quarters the year prior, according to the SEC.
“NVIDIA’s analysts and investors were interested in understanding the extent to which the company’s Gaming revenue was impacted by crypto mining and routinely asked senior management about the extent to which increases in gaming revenue during this time frame were driven by crypto mining,” the SEC wrote .
But because Nvidia failed to mention the role of cryptomining in those figures – while properly citing cryptomining in other areas of its report – it gave the misleading impression that Nvidia’s gaming growth was sustainable or organic, not due to demand for a volatile digital currency, the SEC said.
“NVIDIA’s disclosure failures deprived investors of critical information to evaluate the company’s business in a key market,” Kristina Littman, who leads the SEC’s Crypto Assets and Cyber Unit, said in a statement. “All issuers, including those who pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate.”