Nvidia accused of reporting $1 billion worth of mining GPU sales as gaming revenue

midian182

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Recap: Remember when Bitcoin reached its record near-$20,000 high back in 2017 and graphics card prices went through the roof? It might have been a dark time for non-mining consumers, but AMD and Nvidia were enjoying the profits. In the case of the latter, however, it’s been alleged in a lawsuit that the company reported $1billion in crypto revenue as gaming revenue.

As per The Register, the suit dates back to 2017, but an amended complaint was filed this week in California. It comes from a group of angry investors, who say Nvidia misled them with its financial reporting.

2017 was the year when cryptocurrency exploded, with Bitcoin coming close to $20,000 in December and other coins reaching record highs. The profit from mining led to graphics cards being bought in bulk for mining rigs, which resulted in shortages and hugely inflated prices. Despite Nvidia’s promise that it remained focused on gamers, few members of its core market could afford or were willing to buy its products.

"In early 2017, Nvidia faced an unusual problem: its flagship product was flying off the shelves. Under normal circumstances, such a trend would be cheered," the suit reads.

"But the enormous sales growth owed not to an increase in demand from gamers (Nvidia's traditional consumer), but rather to bands of online prospectors who were buying up the processors by the thousands and deploying them in massive datacenters to solve complex mathematical problems in pursuit of digital tokens."

While everything seemed rosy for Nvidia, the suit claims it knew the cryptocurrency craze would come to a sharp end, so it decided to conceal much of the cryptomining sales. It’s alleged that the company insisted its dedicated mining cards were being sold to miners, and the booming gaming graphics card sales were coming from gamers. In reality, both miners and some gaming fans were buying up gaming GPUs.

Investors say that by reporting mining revenue as gaming sales, it appeared that Nvidia's GeForce products were doing well and wouldn’t be affected by a crypto crash.

"Launching the crypto SKU and reporting its sales in the OEM segment thus allowed defendants to claim that any mining-related revenues were cordoned off in OEM, creating the impression that Nvidia’s crown jewel gaming business was insulated from crypto-related volatility (and the crash in demand that would follow the cryptocurrency markets’ inevitable bust)," the suit claims.

When the inevitable happened and crypto prices crashed, Nvidia’s shares fell 19 percent in November 2018, losing almost half their value a month later. It’s claimed that the company under-reported its cryptocurrency-mining revenues by around $1.13 billion.

The suit seeks damages for what it claims was a violation of US securities laws, but it would be surprising if the complaint succeeded. Why would Nvidia report gaming card sales in a segment other than ‘gaming,’ even if they weren’t being used for that purpose? And it’s not as if buying multiple GeForce cards for cryptomining was a secret.

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There is no difference between speculating on stock exchange and crypto mining. Never underestimate the need for greed. Scale doesn't matter. The more you have, the more you want. For corporations it doesn't matter that they cannot see amount of 00000s at the end of balance sheet. Every extra 0 is worth the risk.

At least in debased minds of CEOs, banksters and rest of that lot.
 
This scenario does NOT account for the flood of used high end cards which then appeared on the market NOR the impact of this on pricing and sales of new cards. Blame shifting is 'gaming' too.
 
The investors need to prove that nVidia misled them, ie. that nVidia stated that profits or sales of gaming cards would be unaffected by crashes in bitcoin mining. If nVidia has stated or strongly implied that anywhere, then they are likely screwed. Not only did bitcoin mining bring the over-inflated prices of gaming cards come crashing down but it also created an immediate and new second-hand market in high powered gaming cards, which investors could not benefit from.
 
So, how was nVidia supposed to know which of their GPU were going to be used in gaming video cards bought for gaming and which for mining ?

I would say they should have error'd on the side of caution. Assume the flatline of traditional gaming purchases for gaming until the tide is gone. You will then have stocks go up and your investors trust in you. Now there is [more] mistrust.
 
So, how was nVidia supposed to know which of their GPU were going to be used in gaming video cards bought for gaming and which for mining ?
Add-in card vendors bulks purchase trays of GPUs, of differing qualities (I.e. each tray will sit in a certain bin specification), directly from AMD/Nvidia. What those chips end up in won't be known for certain, but they'd be able to figure out just from the quantities of which tray ranges are being purchased the most. And the ones that are most favoured for mining are those that sit in the lowest voltage/power bins.

Of course, in the initial mining boom, standard graphics cards were those mostly used, but as the momentum picked up, miners became increasingly more picky about which brand and model they would buy - this information would be easily gleaned from sales of GPU sales.

So while AMD/Nvidia won't be able to pin down exact figures for gaming, office, mining, etc they'd have a reasonable idea.
 
What I don't understand is that once Nvidia sells the hards to OEMs it has nothing to do with it. If they sell a card to Asus that Asus sells to Newegg and that card gets bought up by a miner, how are they even supposed to know that?

Sounds like some investors are made they lost money and are looking for Nvidia to foot the bill
 
Add-in card vendors bulks purchase trays of GPUs, of differing qualities (I.e. each tray will sit in a certain bin specification), directly from AMD/Nvidia. What those chips end up in won't be known for certain, but they'd be able to figure out just from the quantities of which tray ranges are being purchased the most. And the ones that are most favoured for mining are those that sit in the lowest voltage/power bins.

Of course, in the initial mining boom, standard graphics cards were those mostly used, but as the momentum picked up, miners became increasingly more picky about which brand and model they would buy - this information would be easily gleaned from sales of GPU sales.

So while AMD/Nvidia won't be able to pin down exact figures for gaming, office, mining, etc they'd have a reasonable idea.
Ah, thanks. That’s a good explanation.

It really seemed like miners would buy almost any GPU they could get their hands on back then. So while nVidia could safely assume that part of the sales were due to miners, I had my doubts that they could report fiscal numbers with a reasonable certainty.
 
So Nvidia contributed to price gouging by hoarding their GPUs causing a supply shrinkage and benefiting from it all 3 fold.
GPU prices skyrocketed making more profits across the board and using those gpus for mining farms that generated crypto currency. Finally Nvidias turing line-up was prices directly in line with the price hike like it was the new norm.
 
Add-in card vendors bulks purchase trays of GPUs, of differing qualities (I.e. each tray will sit in a certain bin specification), directly from AMD/Nvidia. What those chips end up in won't be known for certain, but they'd be able to figure out just from the quantities of which tray ranges are being purchased the most. And the ones that are most favoured for mining are those that sit in the lowest voltage/power bins.

Of course, in the initial mining boom, standard graphics cards were those mostly used, but as the momentum picked up, miners became increasingly more picky about which brand and model they would buy - this information would be easily gleaned from sales of GPU sales.

So while AMD/Nvidia won't be able to pin down exact figures for gaming, office, mining, etc they'd have a reasonable idea.
It however is still a product made for gaming and is labeled as such, so any ancillary uses wouldn't really be a thing for them to consider. I mean if you want to go down the rabbithole they can claim gaming cards aren't meant for compute workloads.
The fact of the matter is investors are stupid, they invest without understanding a market or doing research, once investors started manipulating Bitcoin prices for the sake of a quick flip by adding arbitrary value based on trading, just like the .com burst it was written on the wall what was going to happen.
 
I don't know the law. But Nvidia has to report how people are using their cards? In a gaming or mining category? That's odd, this sounds like an investors problem.
 
So, how was nVidia supposed to know which of their GPU were going to be used in gaming video cards bought for gaming and which for mining ?

If you don't know who your core customers are and what their needs look like so you can cater to them, then you're not a good business entity.
 
So they need to be clairvoyant right? Or they are not good business entity? What businesses are you running? You must be a billionaire...
 
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