The SEC justannounce the costs and settlement today deal with Nvidia over its GPU sales to crypto miners. The accusation is relatively clear-cut, it simply states that Nvidia misled investors by reporting a huge increase in ‘gaming’ related revenue in 2018, essentially obscuring how much that increase was actually based on. in the mining market.
It should be noted that Nvidia agreed to pay a $5.5 million fine to end this proceeding but does not admit mistakes according to the rules† This approach aimed at ending proceedings is relatively common in the US. However, it confirms that Nvidia has deliberately hidden from investors the weight of mining in graphics card sales, as many voices were raised to point out that the emerging GPU shortage was likely linked to mining.
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In its order, the SEC states that “the company’s dedicated sales force, particularly in China, has reported what they believe to be a significant increase in demand for gaming GPUs due to crypto mining.” For the SEC, the desire to hide this reality increased the risk for investors who, based on Nvidia’s communications, may have thought revenue growth was a reliable trend.
“NVIDIA analysts and investors wanted to understand how the company’s gaming revenues were affected by mining and regularly asked senior management how much of the increase in gaming revenues over this period was due to crypto mining.” However, in 2018, a cryptocurrency crash confirmed investor concerns as Nvidia immediately cut its quarterly earnings forecast by $500 million. A situation that gave rise to an action in shareholder right†
“NVIDIA’s disclosure errors robbed investors of critical information to assess the company’s operations in a key market,” said Kristina Littman, head of the SEC Enforcement Division’s Crypto Assets and Cyber Unit. “All issuers, including those seeking opportunities related to emerging technologies, must ensure that their disclosures are timely, complete and accurate.”
All in all, this fine remains a drop in the ocean for Nvidia and makes it possible to close a procedure that could have left more marks on the company’s image.