Tales from the crypt-oh: Nvidia accused of concealing $1bn in coin-mining GPU sales as gaming revenue
- Reference: 1589578086
- News link: https://www.theregister.co.uk/2020/05/15/nvidia_shareholder_complaint/
- Source link:
An [1]amended complaint [PDF], filed this week in California by aggrieved investors, accuses Nvidia of trying to pass off the sales of as much as $1bn in accelerator chips for cryptocurrency mining as gaming hardware. Nvidia did not respond to a request for comment.
The suit dates back to 2017 when the cryptocurrency market was doing well, and in particular there was soaring demand for the math engines in graphics cards to use in mining new online fun-bucks.
"In early 2017, Nvidia faced an unusual problem: its flagship product was flying off the shelves. Under normal circumstances, such a trend would be cheered," the suit reads.
"But the enormous sales growth owed not to an increase in demand from gamers (Nvidia's traditional consumer), but rather to bands of online prospectors who were buying up the processors by the thousands and deploying them in massive datacenters to solve complex mathematical problems in pursuit of digital tokens."
The suit goes on to explain how Nvidia courted the crypto-currency world by selling dedicated hardware specifically marketed for mining, but still found that many of its gaming cards were being purchased for crafting alt-coins.
Knowing the market for mining hardware could cave at any moment, it is alleged Nvidia management – CEO Jensen Huang, CFO Collette Kress, and SVP Jeff Fisher – decided to conceal much of the cryptomining sales.
Ampere, Nvidia's latest GPU architecture is finally here – spanking-new acceleration for AI across the board [2]READ MORE
This involved sweeping most of the cryptocurrency hardware sales under the OEM and intellectual property carpet, it is alleged. Nvidia insisted its dedicated mining units were being sold to miners, and that its red-hot graphics card sales were due to soaring demand by gamers, when really gaming GPUs were being snapped up by crypto-fanatics as well as video game players, it is claimed.
The re-shuffle thus allowed Nvidia to tell investors that it was still getting most of its revenues from the more stable gaming hardware space, even [3]as gamers grumbled over months-long waits for cards as miners bought up all the inventory.
"Launching the crypto SKU and reporting its sales in the OEM segment thus allowed defendants to claim that any mining-related revenues were cordoned off in OEM, creating the impression that Nvidia’s crown jewel gaming business was insulated from crypto-related volatility (and the crash in demand that would follow the cryptocurrency markets’ inevitable bust)," the suit reads.
Fast-forward to November 2018, when the market for cryptocurrency mining did indeed collapse, and took Nvidia's share price down [4]by 20 per cent , dealing a blow to those who invested just prior thinking they were onto a good long-term thing. Analysts cited in the suit reckon that Nvidia under-reported its cryptocurrency-mining revenues by around $1.13bn.
Now, the shareholder class wants to collect damages from the company and execs for what they say are violations of US securities laws by execs who were misrepresenting where the company's revenues were coming from, and costing investors big bucks when it all came crashing down.
"A host of facts support a strong inference that Nvidia and the individual defendants knew or were deliberately reckless in not knowing the true facts concerning the impact of cryptocurrency-related demand on Nvidia’s financial performance when making the misleading statements and omitting the facts," the suit claimed. ®
[1] https://regmedia.co.uk/2020/05/15/nvidiashareholdersuit.pdf
[2] https://www.theregister.co.uk/2020/05/14/ampere_nvidias_gpu/
[3] https://www.theregister.co.uk/2018/03/30/nvidia_geforce_chips_crypto_miner_induced_shortage/
[4] https://www.theregister.co.uk/2018/11/16/nvidia_q3_2019_stock_hit/
More long term than any other?
This. The lawsuit is ridiculous, taking the stance that "You sold $2bn worth of chips, but didn't precisely tell [Wall Street] which type of customers bought which type of product."
(Directed to the plaintiffs)
So let me get this straight: nVidia never lied, in any fashion, as to how many units it sold in total. You aren't arguing that point. What you ARE arguing is that nVidia didn't divide out markets to your satisfaction because you wanted to hedge your bets only in one direction, that being yours , and if nVidia wasn't doing precisely what YOU thought they should be doing, you may have double-guessed how much play money you expected your bets to double down on.
Here's the thing: no company is *required* to split out market analysis for each product sale. Companies deny sales details, customer or product specifics all the time. They do it because scum investors want to play roulette with only the parts of a company that makes them happy - the Carl Icahn scenario. Where a company isn't doing good unless they are doing things MY way.
So you played only because you wanted to see numbers that made you, exclusively, happy. Damn the fundamentals of the business, are they trendy NOW, I want instant returns. I'll bail if things don't go my way, so make sure they either go my way *or* you give me advanced warning (market analysis, even to the point of future projections).
My pinky-sized fiddle is playing for you, dear.
How the hell is NVIDIA supposed to know what the cards it's customers buy are going to be used for?
RE: How does Nvidia know?
You've seen the new licensing shit they have right? There's going to be an estimate for how much pirated GPU power being tossed around internally.
South Sea Buble?
Investors looking to cover up their own lazyness. How the hell would Nvidia know what their customers where using the cards for? Do Tescos know what their customers cook with the chicken breast they sell them or B&Q know what their customers paint with the Dulux they buy?
Dumb arse lazy people looking to recover losses from their own stupidity of investing in a company and market they know nothing about that over inflated teh price in the first place.
South Sea Bubble and DotCom bubble spring to mind, you got burnt because you didn't understand what wasd driving the market.
Tough get over it and move on to your next fragile investment suckers.
Re: South Sea Buble?
Chicken painting is an ancient and noble art, my friend.
Well you can put what you like in a lawsuit...
...but it's another thing to win it.
I don't think that Nvidia was particularly embarrassed to sell products related to cryptocurrency or blockchain. 95% of startups were blockchain. I am also certain their lawyers and accountants know what you can and don't have to put in accounts to shareholders.
Looking for the class action against people doing chips for AI in a few years.
Traders deserve what they get
Investors who bought just before the crash have a profit as Nvidia stock is hitting new highs despite COVID-19.
Traders who try and jump into and out of the hottest thing lost money. Cry me a river.
"Now, the shareholder class wants to collect damages from the company "
Shareholders are the company. So basically they're suing themselves in order to get back a fraction of what it'll cost them after the lawyers have taken their whack. Where on Earth do they think the money's going to come from except shareholders' funds? Or do they think the company is going to string a few cards together and whip up some Bitcoin to pay them?
They should have remembered that the guys who made money out of gold rushes were those who sold shovels.
Why would investors think a jump in gaming chip sales would be any more long term than any other jump in sales?
Even the release of a new product that produces a rise in sales doesn't mean it will be long term.
Nobody with any sense or knowledge of long term investment will base their purchase on short term performance, that is more for differentials traders.