Several law firms announced the filing of a class-action lawsuit against chipmaker Nvidia Corporation, alleging they mislead investors regarding the company’s ability to cope with weaker demand for cryptocurrencies.
Rosen Law Firm, the Law Offices of Howard G. Smith, the Schall Law Firm, and Glancy Prongay & Murray LLP (GPM), in separate press releases, announced the filing of a complaint against Nvidia, whose stock price has fallen about 50% since the beginning of October.
The law firms’ complaint was filed on behalf of those who purchased Nvidia shares from August 10, 2017 to November 15, 2018. Investors interested in participating were encouraged to get in contact with either of the law firms.
According to the press statements, Nvidia had allegedly made “false and/or misleading statements” assuring investors of the company’s ability to adjust to changes in the cryptocurrency markets, and that demand for graphics processing units (GPUs) among the customer base of computer gamers would be enough to avoid a negative impact.
“[A]s cryptocurrency prices began to plummet, NVIDIA masked slowing growth by continuing to push mid-range GPUs into the channel, which caused inventory levels to skyrocket and ultimately left NVIDIA with over three months of excess inventory in its channel,” Howard G. Smith and GPM said.
The two law firms also noted that Nvidia had told investors last November 15 that it expected revenue to drop 7% in the fourth quarter, “a significant departure from the 17% growth investors had been led to expect.”
In August, Nvidia announced it would discontinue with cryptocurrency-specific products due to a lack of profits. Not only has the company had to deal with plummeting cryptocurrency prices, which have made mining operations less lucrative, but it faces competition from ASIC chipmakers, some of whom have been developing chips more efficient than those in the market today.
While the company has shifted its attention to other ventures such as artificial intelligence (AI), it has had to factor in a buildup of inventory in connection with its cryptocurrency business.
Nvidia’s revenue for the third quarter of 2018 was $3.18 billion, 21% higher year on year, yet still below analysts’ expectations. Net income was $1.23 billion, 47% higher year on year.
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