SEC fine and export probe increase pressure on Nvidia management
The Northern District Court of California will hear a class-action lawsuit filed by shareholders against Nvidia and its CEO Jensen Huang. Shareholders claim the company understated revenue from graphics cards used for cryptocurrency mining, leading to a drop in stock prices.
Highlights
- Nvidia faces shareholder class-action over crypto mining revenue
- SEC previously fined Nvidia $5.5M for nondisclosure of mining impact
- Multiple legal cases could affect Nvidia’s stock and reputation
They missed out on the crypto mining boom
Investors allege Nvidia concealed over $1 billion in GPU sales related to crypto mining from August 2017 to November 2018. During that period, the crypto mining boom drove high demand for Nvidia processors. However, the company did not disclose this in shareholder documents, resulting in misinformation and stock declines: 4.9% on August 16, 2018, after a revenue forecast cut, and 28.5% over two days on November 15, 2018.
The SEC previously investigated Nvidia’s crypto mining reporting. In 2022, the regulator fined Nvidia $5.5 million for failing to disclose the mining impact on its business, and the company agreed to cease the illegal practices.
The shareholder lawsuit isn’t the only legal challenge facing Nvidia. On March 22, U.S. authorities arrested Hong Kong resident Stanley Y. Zheng for illegal Nvidia product smuggling. Shortly after, his U.S. partners Matthew Kelly and Tommy Shad Inglish surrendered.
Stricter reporting and export oversight
This group allegedly planned to export computer chips to China via Thailand and may have been connected to exporting Supermicro servers. Whether Nvidia employees were involved is unknown, but simultaneous legal cases create a negative backdrop, potentially affecting the company’s reputation and stock value.
Experts note that the shareholder lawsuit could test rules for disclosing specialized business segments. If Nvidia is found in violation of financial reporting rules, other chipmakers may face stronger transparency demands in volatile and fast-growing markets like crypto mining.
Additionally, the combined effect of multiple cases, including export investigations, may push Nvidia’s management to revise internal control and risk management procedures. This could impact both legal compliance and investor confidence, influencing long-term stock performance.
As we wrote, Bearish technicals keep Nvidia stock under pressure following stock split and dividend hike
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