NVIDIA, an American technology company producing graphics processing units (GPUs) that mine cryptocurrencies among other uses, is having a class action lawsuit filed against it by The Shall Law Firm. The Schall Law Firm, which is a national shareholder rights litigation firm, is encouraging anyone who purchased NVIDIA shares between 10th August 2017 and 15th November 2018 with losses “in excess of $100,000” to contact the law firm. On the 15th November 2018, NVIDIA released its earnings for third quarter following after the market close.
Reasons for the Lawsuit
According to a press release published by The Schall Law Firm on 24th December 2018, NVIDIA made false statements which ultimately mislead investors in the market. These false statements largely focused around the cryptocurrency market. NVIDIA highlighted its ability to monitor the cryptocurrency market and rapidly change when necessary. According to the press release, NVIDIA claimed to be “masters at managing our channel, and we understand the channel very well.” Included in the press release is NVIDIA’s claim that a reduced demand for GPUs for cryptocurrency mining wouldn’t affect NVIDIA’s business, due to the demand for GPUs in the gaming market. These false and misleading statements from the company affected investors, who suffered damages when these claims didn’t materialize.
Shareholders who suffered losses as a result of these claims are being asked to contact The Shall Law Firm. NVIDIA reported a significant decline of over 7% (contrasted to the 17% growth investors expected) on November 15, 2018 in its Q4 revenue guidance. This result highly reflected the state of the cryptocurrency market in general, which experienced a huge decrease from its all-time high levels in December 2017 / January 2018. The knock-on affect from this was overall market sentiment was a decrease in share price for NVIDIA shares. The announcement of NVIDIA’s decline significantly affected share prices, which dropped from $202 on November 15th to $144 on November 19th, just a few days later. This trend has continued since November, as the share price has continued an overall decline to its current January 4th level of $136. This stands in stark contrast to the $290 peak the NVIDIA share price experienced on October 1st 2018.
GPU Miners Unprofitability
On 13th November, CNBC reported that GPU miners were no longer profitable for mining Ethereum. This was based on analysis performed by Susquehanna, where the monthly profit for mining Ethereum were seen to have dropped from $150 to $0 by November 2018. GPUs are produced by NVIDIA for both the cryptocurrency and gaming markets. However, as these GPUs are no longer profitable to mine, NVIDIA has experienced a huge impact on their revenues as a result. As the demand for mining equipment boomed in the cryptocurrency bull run of 2017, so too did the revenues for producers of this technology. According to Jensen Huang, CEO and founder of NVIDIA, “Our near-term results reflect excess channel inventory post the crypto-currency boom, which will be corrected.”