Nvidia accused of falsely recording $1B mining revenue as gaming sales

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Computer processing giant Nvidia is being sued by investors, after allegations the firm allegedly covered up $1 billion of revenue from its digital currency transaction processor hardware business.

The multinational is accused by a group of investors of falsely reporting the revenue as coming from its gaming chip business, which is seen as a more stable revenue stream.

CEO Jensen Huang, CFO Collette Kress and senior vice president and head of gaming Jeff Fisher are accused of knowingly covering up the source of the sales, in an attempt to hide an unsustainable peak in revenue as more sustainable growth, the plaintiffs claimed in their class action suit.

The plaintiffs argue the “defendants opted for a strategy that would capitalize on miners’ fervent demand for GeForce GPUs while falsely telling investors that the spike in GeForce sales came from gamers, not miners.”

The strategy is alleged to have been deployed to cover up the likely temporary nature of the revenue, which in reality is tied to the wild fluctuations of digital currency markets: “Defendants refused to publicly acknowledge that NVIDIA’s proliferating sales were the result of fickle cryptocurrency miners, lest investors discount the Company’s stock to reflect the volatility of crypto-related demand.”

The case follows a previous significant downturn in share price at Nvidia in 2018, which saw the company lose 20% of its value after demand for processing units fell from the highs of 2017.

The shareholders are now seeking damages for the alleged violation of securities laws, namely misrepresenting the source of revenue under the U.S. Exchange Act.

The case will be decided by jury trial, which will determine whether the reporting was knowingly false.