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According to the SEC, Nvidia failed to disclose how cryptocurrency mining fueled growth in the second and third fiscal quarters of 2018, which occurred in 2017.
As part of a settlement with the Securities and Exchange Commission, Nvidia will pay $5.5 million to investors for failing to adequately disclose them about how cryptocurrency miners fueled demand for its graphics cards.
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The agreement brings to a close a narrative in which Nvidia, well known for gaming graphics cards, received a surprising revenue boost from bitcoin miners, which then faded away to become insignificant. Nvidia was unavailable for comment.
Graphics cards, like those Nvidia makes, are well-suited to mine ethereum. In 2017, ether prices rose from under $10 to over $800, prompting miners to buy new hardware to cash in.
Nvidia’s gaming category, which is how the company reports those sales, rose 52% on an annual basis in the second quarter of its 2018 fiscal year (which ended June 30, 2017), and by 25% in the following quarter — but Nvidia failed to disclose cryptocurrency’s effect on that growth, the SEC says.
Nvidia was aware that cryptocurrency mining was driving part of its business, according to the SEC filing.
The company’s sales staff in China at the time believed the increase in demand for gaming GPUs was because of miners, and Nvidia’s senior management wanted to go after the crypto mining market, according to the SEC filing.
But cryptocurrency may have ended up being a distraction for Nvidia as demand grew for its graphics cards for their intended uses, gaming and artificial intelligence.
In 2021, Nvidia released new cards intended for mining called Cryptocurrency Mining Processor, and added software to its graphics cards to prevent them from being used for mining. Nvidia’s graphics cards were in extremely short supply in 2020 and 2021 as gaming demand driven by the pandemic prompted users to upgrade their home gaming PCs. However, CMP sales have declined sharply since their introduction. In the most recent quarter, CMP revenue was only $24 million, down from $266 million in the August 2021 quarter.
“Our GPUs are capable of cryptocurrency mining, though we have limited visibility into how much this impacts our overall GPU demand,” Nvidia CFO Colette Kress said in earnings commentary in February.
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