NVIDIA fined $5.5 million for misleading investors over crypto
NVIDIA – a graphics chipmaker that supplies the equipment used by many crypto mining operations – has agreed to pay a $5.5 million fine after the Securities and Exchange Commission (SEC) levelled charges at it.
The SEC alleged that NVIDIA had failed to adequately inform investors about the impact that cryptocurrency mining operations had had on the business. This is because NVIDIA’s high-powered gaming segment posted YOY growth of 52 per cent and 25 per cent back in the second and third quarters of 2018.
However, that growth wasn’t driven by gamers – the target consumers of this product. Rather, they were being snapped up by crypto miners, who need incredibly powerful chips to produce the digital assets. The lack of disclosure about who was buying the chips meant, the SEC argued, that investors had an inadequate understanding of the company’s business.
“All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate,” Kristina Littman, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit, said.
In recent years, getting high-powered chips for gaming has been difficult, with the industry experiencing massive global shortages. NVIDIA appeared to understand that the problem was being caused by the crypto mining industry, as the company subsequently launched a line of processors specifically designed for that segment, the Cryptocurrency Mining Processor, CMP, while also updating gaming-orientated processors to block attempts to turn them to crypto mining.
Unfortunately for NVIDIA, the downturn in crypto prices has also affected demand for these CMP chips. Not only is NVIDIA not paying a $5.5 million fine, but the crypto-mining hardware segment revenue was reported to have declined 77 per cent between the third and fourth quarters of 2021. Given the flat and volatile performance of crypto this year, it is unlikely that NVIDIA has turned that segment around yet.