Nvidia's old case is being retried, alleging it concealed $1 billion in "mining" revenue—a hidden story from the AI ​​giant's past.

Author: Nancy, PANews

Recently, Nvidia has been the subject of a class-action lawsuit by investors, who allege that it concealed more than $1 billion in cryptocurrency mining revenue, drawing market attention.

This protracted lawsuit has once again drawn market attention back to the frenzied gold rush of yesteryear. Nvidia, now an AI empire, was a direct beneficiary of that craze.

Accused of hiding over $1 billion in cryptocurrency mining revenue, a class-action lawsuit has officially begun after years of litigation.

A U.S. federal judge has approved a class-action lawsuit filed by investors against Nvidia and its CEO Jensen Huang.

According to the plaintiff, between 2017 and 2018, Nvidia concealed the extent to which its gaming graphics card revenue was dependent on demand from cryptocurrency mining.

The lawsuit was initially filed by investors in 2018 and dismissed in 2021. Following an appeal, Nvidia's appeal to the U.S. Supreme Court was not heard, and now the case has been formally approved as a class-action lawsuit.

The plaintiffs argue that Nvidia generated over $1 billion in cryptocurrency-related revenue through its GeForce gaming graphics cards, but attributed the majority of it to its "gaming business," thus downplaying the risks to investors. Investors allege that CEO Jensen Huang underestimated the true scale of cryptocurrency demand at the time. Nvidia had previously maintained that cryptocurrency mining accounted for only a small portion of the company's business, with gaming revenue primarily derived from gamers.

The plaintiff argues that this practice directly exposed the company to the risks of cyclical fluctuations in the cryptocurrency market. In particular, following the company's corrective disclosure in November 2018, the stock price fell by approximately 28.5% within two days.

More importantly, the court cited an internal email from an Nvidia vice president in its ruling, deeming it particularly compelling evidence. The judge noted that an internal executive had stated, "The company's stock price has remained high precisely because of previous statements," indicating that these remarks had influenced the stock price.

In fact, back in 2022, the U.S. Securities and Exchange Commission (SEC) accused Nvidia of failing to adequately disclose the impact of cryptocurrency mining on its gaming business, alleging that its financial reports for two quarters could mislead investors. Nvidia neither admitted nor denied the SEC's allegations, but agreed to pay a $5.5 million fine and reach a settlement.

The approved class-action lawsuit covers investors who purchased Nvidia stock between August 10, 2017, and November 15, 2018. The court plans to hold a hearing on April 21, at which time the judge will clarify the subsequent trial procedures.

Nvidia's mining history in the crypto gold rush

Let's go back to the 2017 bull market. Mining machines were snapped up, chips were in short supply, and countless prospectors flocked to Bitcoin mining.

At that time, Nvidia was best known for its gaming graphics card business. However, with the soaring prices of cryptocurrencies led by Bitcoin and Ethereum, the graphics card market experienced a severe shortage, leading to a prolonged period of high demand and supply. Nvidia's GPU products were naturally in short supply as well, making it difficult for ordinary gamers to obtain a single card.

In 2020, a new bull market reignited mining enthusiasm. This time, Nvidia took the initiative, launching CMP mining cards specifically designed for Ethereum mining to meet its unique needs, and limiting the mining performance of its RTX 3080, intended for gamers. Even so, it couldn't curb the miners' fervent demand. According to Nvidia, in the first quarter of 2021 alone, sales of CMP mining chips reached $155 million, while the global market for discrete graphics cards used for cryptocurrency mining was approximately $500 million during the same period.

It's clear that this cryptocurrency mining boom has made Nvidia a fortune. However, how much of this revenue actually came from miners remains a mystery. In Nvidia's financial reports, mining revenue is categorized under the gaming segment, making it difficult for outsiders to accurately analyze its true structure.

However, in terms of revenue, cryptocurrency mining did indeed "boost" Nvidia's performance at the time. In 2018 alone, Nvidia's revenue reached $9.714 billion, an increase of 41% year-on-year, with gaming contributing more than half (approximately $5.5 billion). Interestingly, Bitmain, a mining company that had only been established for a few years at the time, was expanding rapidly, and its profits were once close to Nvidia's, while Nvidia was one of its suppliers.

However, this revenue is heavily influenced by the cryptocurrency cycle. The sharp drop in mining demand in 2022 led to a decline in Nvidia's sales and excess inventory. The gaming business also became a major drag on its overall performance, with declining GPU sales being a significant contributing factor. Interestingly, Nvidia CTO Michael Kagan stated in 2023 that cryptocurrencies would not bring anything useful to society, and that the emergence of platforms like ChatGPT would be the "iPhone moment" for AI.

Afterwards, Nvidia's AI rise became widely known, making it the strongest "shovel seller" in the AI ​​era, and it started selling new tokens. Meanwhile, mining companies that had previously profited effortlessly also began to turn their attention to the AI ​​business.