- Company Name
- NVIDIA Corporation
- Stock Symbol
- Class Period
- August 10, 2017 to November 15, 2018
- Motion Deadline
- February 19, 2019
- Northern District of California
The complaint charges NVIDIA and certain of its officers with violations of the Securities Exchange Act of 1934. NVIDIA designs, develops, and markets graphics processing units (“GPUs”) and related software. Although traditionally used in connection with computer gaming, demand for the Company's GPUs surged as they became widely used in connection with cryptocurrency mining. Given the volatility in the cryptocurrency market, the Company's ability to adapt to the ever-changing cryptocurrency landscape was critical to investors.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding NVIDIA’s business and prospects. In particular, defendants concealed that demand for NVIDIA gaming GPUs among cryptocurrency miners was a much more significant driver of NVIDIA’s growth than the Company had disclosed. Additionally, the Company misrepresented its visibility into its inventory channel and its ability to adapt to changes in the cryptocurrency markets. As a result of this and other information being withheld from the market, NVIDIA shares traded at artificially inflated prices throughout the Class Period.
The truth began to be disclosed on August 16, 2018, when NVIDIA announced its financial results for the second quarter of fiscal 2019, ended July 29, 2018. The Company lowered its revenue guidance for the third quarter of fiscal 2019 and reported that it no longer expected a meaningful contribution from cryptocurrency miners for the remainder of the year. NVIDIA also reported that its GPU inventory had ballooned by over 30% from the prior quarter, which investors feared could be a sign of slowing demand for NVIDIA’s GPUs. As a result of these disclosures, NVIDIA shares dropped $12.62 per share, a decline of nearly 5%.
Then, on November 15, 2018, NVIDIA issued a press release announcing its third quarter fiscal 2019 financial results. The Company reported that it had significantly cut its revenue guidance for the fourth quarter of fiscal 2019, revealing that revenue would actually decline by over 7% in the quarter – a significant departure from the 17% growth investors had been led to expect. NVIDIA attributed its poor financial results to the surging inventory of midrange GPUs that had built up before the rapid fade of cryptocurrency mining. “The crypto hangover has left the industry with excess inventory – excess channel inventory,” the Company’s CEO, Jen-Hsun Huang, admitted to investors in a conference call with analysts following the earnings report. As a result, the Company said it would not ship any of its midrange GPUs into the channel for at least an entire quarter. As a result of these disclosures, the Company’s share price dropped $57.69 per share over the next two trading sessions, a decline of nearly 29%.