SEC Charges Nvidia with Inadequate Disclosures about Impact of Cryptomining
sec.gov
sec.gov
This is the SEC doing their job, giving a public company a reminder to be honest about their disclosures. The fine is insignificant and nobody is in trouble.
It has nothing to do with whether people could've read between the lines, whether NVIDIA has a duty to know what their products are used for, or anything like that. Just that they knew what was going on and told a small lie to bolster their finances. You should be able to read company financial disclosures and trust them.
>The demand for our products depends in part on the market conditions in the industries into which they are sold.... for example, our GPU revenue has been affected in part by the volatility of the cryptocurrency mining market...If we are unable to manage the risks related to the volatility of the cryptocurrency mining market, our GPU business could be materially adversely affected.
That's from their most recent one, but similar statements are in prior ones as well.
[1] https://ir.amd.com/sec-filings/filter/quarterly-filings/cont...
AMD was underselling it too though (in 2017-2018 it was a huge factor, not so much this time) and they had a huge inventory overhang lasting years as well... ctrl-f "inventory" in their late-2018/early-2019 earnings call transcripts.
https://www.fool.com/earnings/call-transcripts/2019/01/30/ad...
Earnings calls are not intended to be anywhere near as comprehensive as a Q-10 filing. They will typically last a shorter time that it would take to merely read the Q-10 itself. Further, earnings calls are not a legally mandated requirement, some companies may not have them at all. This makes them less susceptible to SEC scrutiny.
As for AMD, they were making similar comments to what I quoted above in their 2018 filings, NVidia was not. AMD downplayed it a bit in an informal non-regulated setting but gave better information in the 10-Q does. For NVidia's 10-Q, it was barely a mention that some earnings were impacted crypto, and they did not (per the SEC & a quick read through of their 2018 10-Q's) sufficiently note that it's gaming growth was still driven to a material extent by crypto, thereby exposing them to even more downside risk than what had already occured.
There is very very little gaming demand for these cards at 2-3x MSRP. Yeah, there's a few, but not many. As mining demand has tapered off this quarter, you've seen prices absolutely plummet, and if there was truly organic gaming demand for cards at those prices, that wouldn't have happened.
When prices get super elevated (that 2-3x MSRP range), IMO the realistic number is at least 30% if not more like 50% of total sales are crypto-related.
Some caveats:
bear in mind that OEM sales are a huge thing. Something like half the cards on the market will never even hit a distribution channel. So even if nearly-100% of aftermarket sales go to miners, there's a significant number being moved in prebuilts. That said, at the height of crypto mania, miners will buy prebuilts and strip them of their GPUs and resell them on ebay/craigslist/facebook, so OEM sales are not 100% crypto-unrelated either.
I am taking that into account when I am guessing 30-50% - I think the number for retail sales are >75% if not >90% miner sales when that happens, and it's really only the OEM sales that hold things down to 30-50%. There are very few actual consumers willing to pay the $2400 that 3080s were going for at their peak, that's triple MSRP, and prices immediately plummeted when the LHR was created, because prices are driven by hash rate and expected crypto profit, not gaming sales.
AMD more or less didn't participate in crypto this time around though, because they simply didn't make any GPUs. 6800 and 6700XT are reasonably competent miners - about 3060 Ti/3070 performance, which is undesirable in a relative sense compared to Ampere and RDNA1 but that's still twice the hashrate of a RX 480, miners still use those cards very happily, and RDNA2 is more efficient because it's 7nm. But it took over a year after launch for the first RDNA2 card to show up on the Steam Hardware Survey - at 0.15% marketshare. Meanwhile Ampere was around 10% marketshare at that time. You can go back and look at the historical Steam results using the Wayback machine, or here's a contemporary article (you don't have to like Tom's, the numbers are from Steam):
https://www.tomshardware.com/news/rtx-3090-outsells-all-rx-6...
(If anything this probably understates it since miners did go after NVIDIA cards preferentially. It’s likely more like a factor of 20x in total shipments, vs the Steam numbers. I guess that’s where you go to the JPR numbers tho.)
Basically, AMD did not make hardly any GPUs because console sales were unexpectedly high and those contracts got first priority, at one point there were reports that console sales were eating 80% (!) of AMD's wafer supply. The remaining wafers went to CPUs since even a consumer CPU is ~10x more profit per wafer than a GPU - it makes complete sense to maximize their revenue on the remaining wafers after consoles got the lion's share.
https://www.hardwaretimes.com/in-q4-amd-supplied-a-total-of-...
RDNA2 was the paperiest of paper launches. They delayed it as long as they could, and did a token paper launch to satisfy investors. I think the term "paper launch" is overused - it doesn't mean "I can't buy one on launch day" or even "I can't get one the first month" - Pascal took 6 months for inventory to normalize, 1080 was unobtanium until about November 2016 and even the 1070 was hard to get for a few months. Someone I know used the term "holodomor launch" at the time (cringe). But RDNA2 was a true paper launch, in the sense of only existing to satisfy commitments made to investors. AMD had no intention of producing serious quantities of it when they could be making 10-50x the money per wafer selling CPUs (and wafers are their bottleneck scaling profit). 6700XT and 6600XT/6600 were the only cards that shipped in any volume and those lower-end cards didn't launch until almost a year after the initial RNDA2 cards.
Not saying that wasn't the right decision in a financial sense, of course. Investors want them to make money, and AMD was very very wafer-bottlenecked. But the GPUs were launched just to say they launched.
But in a backhanded way, that was a good strategy this time around. No GPUs manufactured means very little crypto exposure. That's one solution to crypto boom-and-bust I guess - find a new market and don't sell GPUs anymore. NVIDIA is very, very subject to the boom/bust cycle of crypto and unlike AMD or Intel they don't have diversity of other products to smooth things out (not just other segments like enterprise/automotive, but other products like CPUs and mobile SOCs, etc).
AMD did participate last time though, and they had a huge inventory overhang that took almost a year to clear just like NVIDIA did. Not sure where people got the idea they didn't, but they discussed it openly in their late-2018 and early/mid-2019 financials calls... Here's a random one from that period I pulled up, ctrl-f "inventory" and look for yourself.
https://www.fool.com/earnings/call-transcripts/2019/01/30/ad...
Also, the bit about "NVIDIA selling cards directly to miners!" ended up being fake and based on tech media wildly misinterpreting a paywalled RBS article (that none of them wanted to pay for lol) that used an estimate of crypto network hash growth to estimate crypto gpu sales... after some massaging the line "miners bought $175m of NVIDIA GPUs based on hashrate estimates" became "NVIDIA sold $175M of their GPUs directly to miners outside retail channels" which simply isn't true.
Fake spin: https://www.kitguru.net/tech-news/featured-announcement/leo-...
Actual article: https://twitter.com/dylan522p/status/1332502890104188929
This is a great example of what I reference elsewhere in the thread, about how there's a clique that likes to manufacture fake or marginal rumors about NVIDIA, because a lot of people have viscerally negative emotional reactions to NVIDIA and it gets a lot of attention and clicks.
Mining card sales (not gaming cards used for mining, but actual dedicated mining cards) were a thing, but a very small thing overall (I'd guess less than 5% revenue as a segment, with gaming running around 50%). And many mining cards are still sold through partners or OEMs like HP... I used to see the EVGA cards coming through b-stock back in 2019.
Now in contrast partners were absolutely selling gaming cards in bulk direct to miners. Miners pay a premium for access to the cards, and partners require them to give up their warranties, so it's an advantageous deal for them, but as far as I know NVIDIA does not sell direct.
Just some baseline stuff that I often see come up in the nvidia/crypto discussions that is wrong, tried to source as much as I can.
To give an example, I'm not a student, but I do have a box with 2 x RTX 2080 sitting in my garage, which I use for hobbyist deep learning research. Sometimes, I also need heating in my garage, it gets cold during the winter. It was pretty easy to flash a NiceHash usb stick. So I boot it from it and it becomes a 1.5kW heater which pays for itself. Not particularly efficient or climate friendly, but oh well.
Yeah, I think a good number of gamers who bought cards are mining on them in their spare time as well. I'm counting that as a gaming sale since it's primarily for gaming rather than someone who set out to buy 10 cards and build a mining rig, but I do think a lot of people did the "well, I'll mine on it when I'm not using it and it'll soften the blow a bit..." approach.
And you don't even need free electricity, the cards were and are still profitable, just not profitable enough (anymore) to gamble $10-20k setting up an industrial-style mining rig with a full loadout of cards. If you have the card anyway (because you game/train AI/etc) then it's still worth mining.
I question how many people cashed out regularly though, there may be a lot of people sitting with a bunch of paper profits from their gaming card...
> And then there are some cards that are used for gaming and to study deep learning, I guess. It is likely a bit more of a mixed use of compute than just pure mining.
I think that's a small market in general, there's not millions and millions of those people and they're not setting up hundreds of rigs with thousands of cards, but yeah definitely, that exists. I know people who bought a quad-1080 ti or quad-3090 rig and used it for gaming/DL/homelab and mined on it when they weren't using it.
It was perhaps a little less appealing this gen since there was never a proper Titan - the 3090 is still locked down in certain types of operations, not just FP64 but also some data types/operations that iirc might be relevant to DL users. bfloat16, and some types of FMA operations, or something like that? But lots of people can work around it or it isn't relevant to the thing they wanted to do, there are still a decent number of DL/homelab people who will buy it. It's again, not a gigantic market, but it's there.
imo with the way prices stacked up - it was $2400 for a 3080 or $3000 for a 3090 on ebay, and it was actually possible sometimes to get 3090s at decent prices ($2000) from partners (Zotac, EVGA, etc), where it wasn't really possible to ever score a 3080 from partners due to extreme levels of demand. So you could score a retail 3090 for cheaper than an ebay 3080, and actually even at ebay pricing, if you're going to spend $2.4k on a GPU anyway... just spend the last $600 and get the extra VRAM. 10GB is going to noticeably shorten the viable lifespan of the card anyway.
Given the pricing, it made a lot of sense imo to aim for the 3090 over the 3080, both for homelab/DL type stuff, and honestly also because the 3080 had a very stingy amount of VRAM out of the box even for gaming. I know the technical reasons (yield, memory bus width, etc) that make this complicated, but I'd really liked to have seen 12GB on the original 3080, if not 16GB. I think GDDR6X was a mis-step in a lot of ways and they would have been better off with a conventional 512b bus with GDDR6 instead of a super-fast 384b bus with GDDR6X... but that also complicates routing and board design.
Anecdotally, I know 10 or so people that paid 2x+ for RTX3000 series cards and zero that are mining. A lot of people my age (about 40) got back into PC games for something to do during the pandemic.
Also miners are typically buying the best card per a price point, which tends to be higher end or datacenter cards. Your average gamer is usually buying a medium tier.
The price point is also completely indifferent.
(even today, a 3090 is still profitable even with absurd $0.30/kWh electricity or whatever - if you are around the national average of 10c they're still doing like $3 a day. Not "buy 10 of them and build a rig" profitable anymore, but at the peak they could do ~$11 a day after electricity and for a long time they were $5 a day after electricity. Pre-LHR 3080s were a beast too, almost the same hashrate as a 3090.)
Anyway the backlash against mining and miners in the 2021 timeframe was real and intense. I'm not saying there aren't legitimate reasons - it's a waste of electricity, it's screwing up the market for everyone else, etc - but I think a huge number of gamers who bought cards in the 2020-2021 timeframe mined on them when they weren't using them and just don't want to admit it.
Unfortunately, crypto is a memeplex, it's like a corporation, it's a self-reinforcing living entity that supports itself (maintains homeostasis) through a series of rules and incentives, and now that it's been created it can't be easily killed. Every individual is financially incentivized to keep playing their part, so everyone would have to collectively agree to not make money by taking part, and as people fall out the incentives become steeper and steeper to participate. Would you mine on your card for $100 a day? $1000 a day?
Even if you pulled the plug on the exchanges, crypto is far enough along that it would be self-sustaining simply based on the black market. And the existence of PoS paradoxically makes it impossible to ever kill the PoW coins, because they can be traded on decentralized exchanges even if the real money exchanges ban them.
We will just have to live with destroying our planet, because now that it's been created it's virtually impossible to kill. That was the whole point. With apologies to Alien: it’s biologically engineered to be a survivor... the perfect predator (of certain other memeplexes).
> Every individual is financially incentivized to keep playing their part, so everyone would have to collectively agree to not make money by taking part, and as people fall out the incentives become steeper and steeper to participate. Would you mine on your card for $100 a day? $1000 a day?
>We will just have to live with destroying our planet, because now that it's been created it's virtually impossible to kill.
You seem to have made up your mind on that front. If all you're worried about is making money at the cost of perpetuating behavior/consumption habits that are in the macroscale approaching pathological in terms of sustainability, that's on yo. Don't be surprised when the rest of society puts a punitive price tag on the activity as people are better able to quantify the tangible costs, and the layers of hype are peeled away.
https://web.archive.org/web/20220126135425if_/https://cdna.p...
It's starting to slowly come down now, but still 2x !
https://cdn.wccftech.com/wp-content/uploads/2018/04/Asus-RX-...
In this case, the severity was fairly low: they didn't lie about what they were selling or how much they were selling, but they did purposefully omit some material information about their customers. If you were convinced that cryptocurrency is the future, then NVidia not mentioning cryptominers should have reduced your forecast of their earnings. If you were convinced that cryptocurrency will die any day now, then NVidia's omission should have increased your forecast for them.
But how much money did people lose? It's hard to say. This should be enough money that NVidia's investor relations people make sure not to do it again, but not so much money that NVidia can't recover.
In a hypothetical where NVidia told lies in order to manipulate its stock price, a much much larger fine should be levied.
SEC failed to disclose the actual numbers, thus righting the wrong Nvidia has done to investors. And 5.5M is a ridiculous fine for something that the insiders benefited from multifold. They missed at least one 0. Someone should have been fired over this.
I would be curious if those insiders that made the decision have sold shares that were inflated.
Not to mention that this would force a culture of attributing blame to individuals which is toxic, encourages people to hide mistakes and when mistakes happen the first thing everyone would scramble to is to find a scapegoat. This is objectively worse for both the company and the shareholders.
The right approach for the government is to appropriately penalize the companies. The right approach for companies is to put in processes that make sure no single person is even in a position to make mistakes like this.
The government isn't penalizing the companies, it's penalizing the shareholders, who are the ones that suffered the inadequate disclosures!
>"Mistakes of this magnitude are often the result of multiple people making mistakes - so blaming a specific person is wrong."
Then either split the fine amongst the responsible parties, or just issue some sort of order that requires changes (such as some sort of audit) without a fine. If you can't find any specific person who did something clearly wrong, it's probably best to avoid blaming 'the company' (which is just a collection of individuals).
The point of the fine is to disincentive the company (and also other companies) from doing the same thing again, unless criminal behavior (i.e. fraud) was involved that’s purely an internal matter for the company (they may fire the people who supposedly did this or do whatever they think is necessary).
If you think it's difficult to figure out who did what wrong, and that the companies are just scapegoating people, then the SEC implementing fines that cause the company to fire people is likely causing unjust firings.
Which begs the question, does Nvidia have a responsibility to know exactly what their equipment is being used for, no matter if that activity is legal or not? Seems they would have to add a mandatory question asking "What are you gonna use this GPU for?" every time they sell a GPU, which seems weird (to me).
But if they do know what their GPUs are used for and then they say something else, that's a problem. And that's what the SEC has a problem with here.
x units were sold from our gaming line of products, however market research indicates y % of them are likely being used for cryptomining.
> NVIDIA had information, however, that this increase in gaming sales was driven in significant part by cryptomining
Color me a little surprised that this is what SEC's Crypto Asset is spending resources on when there is such a dumpster fire of obvious fraud in other areas of crypto (looking at you, public mining companies), but I suppose NVIDIA's upswing did catch a lot of retail investors.
But the official disclosures of public equity firms is one of the lampposts the SEC's clearly mandated to look under. In fact, crypto is essentially immaterial here. If NVIDIA knew that a huge part of their GPUs were being used for the new, highly-volatile fad of Quantum Fubaring instead of the gaming market NVIDIA'd previously disclosed was the market target, the SEC would still have the right and responsibility to ding them for deceptive or insufficient disclosures.
They are being charged not for not knowing, they are being charged for knowing and not disclosing it. The "knowing" part seems to be a forgone conclusion, or at least SEC must have ironclad proof.
>> Seems they would have to add a mandatory question asking "What are you gonna use this GPU for?"
No, but if they are selling thousands of GPUs to cryptominers, they don't need to ask to know. Same how if the US Airforce purchased 100k GPU chips, you can safely assume they won't be using them to play Fortnite, no questionnaire necessary.
My intention was to gently counter this statement. I took Fortnite as a proxy for video games and I meant to add to the conversation that it does use video games. For a while the military was even publishing video games.
The SEC doesn't need ironclad proof for a civil fine. The standard is preponderance of the evidence, not beyond a reasonable doubt.
Importantly, they did (according to the press release) know that a big part of their sales growth was from cryptomining. I have no idea how they measured the magnitude, but miners weren't exactly quiet about scooping up graphics cards.
This basically means everything is securities fraud: https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
The parent question still stands: why would NVIDIA need to police how their products get used? They're not manufacturing weapons or drugs.
They simply need to release fiancial statements which accurately reflect material information they know.
That securities law can be abused unscrupulous profit seeking lawyers is not news, and isn't really germane to this case. The issue at hand was disclosing information essential to financial results rather than fanciful hypothetical risks.
Basically they were dishonest about the nature of the business that was driving the short term growth.
I mean, who am I to argue with SEC, but "past performance is not indicative of future results" should be firmly planted in the minds of everyone remotely capable of understanding the 10-Q.
To me this seems like it was a "hey, you should definitely split out crypto earnings in your gaming division" with a slip on the wrist. Doesn't sound like a big deal.
And going on the tangent, who says earnings due to crypto are more risky than earnings due to gaming? There's been a dearth of new AAA titles and due to the inflation gamers may very well delay their PC upgrade. Sounds as risky as miners to suddenly stop buying equipment, and faster than what the hardware-hungry gaming crowd can get their hands on.
It's not that there's an expectation that retail (or any given) investor reads the 10-Q; it's sufficient that there is a standardized way to publicize that information and, if you lose money because you didn't read the readily available information, well, you're an adult who can make investment decisions on whatever criteria you want and that's on you.
It looks to me like Nvidia downplayed where their growth was coming from so investors (conjecture based on my own observations) couldn't accurately gauge the risk associated with their growth and that is where the SEC starts paying attention.
I guess it doesn’t even matter because the $5.5 million fine is so laughably small for the rewards they reaped that I’m sure they are still laughing.
you answered this yourself.
I agree that it seems dumb for the average investor not to know this, but this is just how this sort of thing works.
They don't want to make that same mistake.
Gamers, and industry insiders, knew this. The general public (i.e. most investors) didn't. Most non-desktop gamers couldn't give two figs about the intricacies of the videocard market, they just invest in growing companies/stocks.
Or, to put it another way, NVidia Stocks go brrr, buy. Nvidia stock no longer go brrr, complain.
Public companies need to be ahead of risks for investors. If they weren't mentioning crypto mining in earnings reports then that doesn't look good at all.
Nvidia needs to provide accurate information on revenues no matter if it obvious or not.
AMD doesn't even report sales of semiconductors for gaming consoles under gaming because it's misleading.
If it was so obvious, why did Nvidia never say it? This is a quote from a transcript, and seems representative of how they put it:
> ... I would say the large majority of the cryptocurrency demand [is for those] specialized products. There are still small miners that buy GeForces here and there, and that probably also increased the demand of GeForces.
While it may be true that everyone knew they were lying or being misleading, that isn't a very good defense.
Every crypto growth cycle is assumed (by enthusiasts) to be more resilient than the prior growth cycle, on the path to steady growth, and this has turned out to be true, with longer and longer steadier growth cycles, with less and less amplitude in the growth and troughs.
in 2018 there was the same optimism, that culminated in a long steep crypto bear market, the longest one so far. Although I think it is obvious that bubbles pop, especially crypto bubbles, I don't think it was obvious or relevant that sales to miners would disrupt so immediately that Nvidia investors needed to know this level of nuance. miners have such high profit margins (if integrated properly) that steep declines in crypto prices shouldn't affect them, but in this case it did.
Especially when looking at the resilience and structure of the mining sector now.
I think this is an odd demand by the SEC, but Nvidia settled it for pennies so moving on.
> Q4’21 sees a nominal rise in GPU and PC shipments quarter-to-quarter
https://www.jonpeddie.com/press-releases/q421-sees-a-nominal...
NVIDIA is like Apple, there's a certain clique that really really hates them and is willing to make shit up and see what sticks, and there's a huge number of people willing to automatically believe the worst, because "green man bad". It's utterly irrational and goes far beyond the technical merits, people have a viscerally negative emotional reaction to these companies and it's mostly not fact-based, it's just the result of two decades worth of fanboyism and grudges.
(I expect this reply will be followed by a bunch of people trying to list off everything bad they think NVIDIA has ever done, a lot of which will have been "massaged" by that same clique. Like bumpgate... but AMD had tons of GPU failures due to bad solder bumping in the 2012 timeframe too, that's why "baking your GPU" was a thing for everyone. Etc etc. NVIDIA is the hillary clinton of companies... they're a broadly competent competitor who does a decent job, but a decade worth of propaganda has convinced everyone that gosh, there must be something there, because I keep hearing about them!)
This is very run-of-the-mill stuff for the SEC. I think the only reason it's getting play on HN is that, if you aren't familiar with this sort of thing, it looks like the SEC is picking on Nvidia for doing business with crypto miners. But that isn't what the complaint is actually about.
It’s like if Intel had 50% of their business from Apple and investors wanted to predict the impact of the M1 chip on their sales.
At first glance, I suspect that they just copy pasted the risk section from the last 10-k and this was just some mistake rather than an intention to deceive. Anybody who knew anything about the business understood that crypto mining was a sizable part of that demand.
Nvidia arguably hedged their bets better this time by 1) releasing their cryptomining-specific versions of GPUs, and 2) releasing drivers that tried to cripple the mining performance on the GeForce 3000-series lineup. But whether this was done in good faith is debatable and whether they disclosed properlyin the eyes of the SEC will be interesting to see.
Most people with 1 GPU use it to mine? I would have guessed that even with things going crazy in the cryptocurrency space pure gamers were a vastly bigger group.
(half a decade ago, one person I knew was getting excited/contemplating it; but he was looking to build a dedicated mining rig, and I don't think he ever followed up)
Legally maybe(?) but practically this makes no sense. In the real world it is the responsibility of an investor to understand what they are investing in while maintaining skepticism and scrutiny of their investment. If you can't identify the correlation between massive gains in crypto value with massive gains in NVDA, you shouldn't be investing in NVDA.
Disclosure: long NVDA
I don't see how Nvidia can reasonably be expected to know who is using their graphics cards for what either. Unless they are actively courting a specific segment, and even then these things are general purpose cards.
It's less about who should know, and more about the fact that NVidia does know. And, in knowing, it is obligated to provide accurate information.
NVidia is also actively courting a specific segment. They have introduced crypto-specific chips as well as hash rate limiters in GPU gaming chips, so they are clearly aware of how mining may be a factor in gaming GPU sales.
The sec may be starting an investigation from the top down to see if nvidia had any involvement in what they are accusing them of and will see what degree of complicity they and board partners had in all of this.
Anyways I’m jumping the gun a bit there but there are distinct differences between cards for typical consumer uses (gaming, and video and machine learning workflows) and mining, and mining was a big part of the reason why prices were insane (a 3070ti which can now be found on sale for 699 was going for 1900+ dollars on amazon at ethereums peak) since January of last year until the recent gradual descent in prices.
> NVIDIA had information, however, that this increase in gaming sales was driven in significant part by cryptomining. Despite this, NVIDIA did not disclose in its Forms 10-Q, as it was required to do, these significant earnings and cash flow fluctuations related to a volatile business for investors to ascertain the likelihood that past performance was indicative of future performance.
The only thing they could be required to disclose was the percent of sales THEY KNEW were being used for crypto. They also wouldn’t be required to capture that data really. Plus I’ve been on their quarterly calls, they’ve been pretty open about their exposure to crypto so idk.
This seems well beyond the scope of the SEC... imo it’s their broader plan to go after crypto, but everyone knows they have no legal basis currently to do so.
However, if your data indicates that most of your revenue growth is likely due to crypto mining and you turn around and tell investors it's because of gaming, you are lying and misleading your investors.
In aggregate .. yes.
As a company, you should know if the increase in sales for your product was a result of the gaming market growing, or the research market growing, or the crypto market growing.
And as a publicly traded company, you have to communicate this to investors.
>Seems they would have to add a mandatory question asking "What are you gonna use this GPU for?"
They don't need to do that.
>In two of its Forms 10-Q for its fiscal year 2018, NVIDIA reported material growth in revenue within its gaming business. NVIDIA had information, however, that this increase in gaming sales was driven in significant part by cryptomining.
It could be argued that they don't have a responsibility, or only a limited one. But in this case they really can't that they're actually unaware of it's use for mining. It's not necessary on an individual person-by-person basis, they know that a substantial amount of hardware is used for it.
Perhaps they don't know exactly how many or what %, but a little bit of market research-- over an issue highly material to their bottom line-- would be expected (and was probably done, but maybe they're bad at their jobs). At a minimum it's trivial to see that sales are correlated to the crypto market.
Also AMD managed to note the risk in its own 10-Q filings.
Isn't there a list containing every risk in the world, that one can paste into the form? Would that suffice?
In other words, is this about the US’s policy towards (foreign?) crypto operations, or is it “just” about nvidia’s investors?
Legally it is all about the disclosure.
Conspiracy minded crypto super fans might find it hard to believe but ultimately this is a small slap for a dorked up disclosure that can be easily avoided by Nvidia. The amount of crypto related purchases could be 100% and as long as Nvidia doesn't dork up disclosing that (or even saying what they know accurately) nothing happens here.
I mean, really entry level folks knew this.
When crypto prices would go down a bunch of articles would pop up saying, hey, maybe supply for gaming will go up.
I read these risk sections and 80% of the stuff is so overblown, boilerplate, repetitive, well known etc that it loses its usefulness.
Because of the GPU shortage, game makers couldn't rely on enough users having the best/latest card, so now there is not much point in having, say, a RTX 3090, where a 3080 performs as well for most non-mining purposes.
Now, what if crypto enters a crisis (or ETH switches to PoS, which is less likely), and then the next generation of GPUs has almost no demand at the inflated triple-digit prices. That's going to be a huge hit to its market cap
NVIDIA ('s distributors) still sale at the lower MSRP (right?) so the risk for them is people not buying them at all, which seems more farfetched
maybe I'm wrong, but I thought the true price was shown by what scalpers could fetch, which means the places the scalpers buy from had the wrong lower price
Yup. Built a rig (2070S/3700X) just before covid/shortage kicked off and it has been holding up suspiciously well two years later - likely due to that effect.
3 year old card and no immediate need for an upgrade in sight.
> In two of its Forms 10-Q for its fiscal year 2018, NVIDIA reported material growth in revenue within its gaming business. NVIDIA had information, however, that this increase in gaming sales was driven in significant part by cryptomining. Despite this, NVIDIA did not disclose in its Forms 10-Q, as it was required to do, these significant earnings and cash flow fluctuations related to a volatile business for investors to ascertain the likelihood that past performance was indicative of future performance. The SEC’s order also finds that NVIDIA’s omissions of material information about the growth of its gaming business were misleading given that NVIDIA did make statements about how other parts of the company’s business were driven by demand for crypto, creating the impression that the company’s gaming business was not significantly affected by cryptomining.
Some commenters are asking where the line gets drawn for the responsibility of disclosure. From this document, the SEC is saying that if material risks are known and not disclosed, that's a red line they will take action on.
So roughly 0.02% of last year's revenue. Basically a warning, I guess.
The wrongdoing here is just so strange and on the fence.
They sell gaming cards, does not matter what game you play (even the mining coin game).
Are you telling your investors that you're using your gaming card for games, and then using it for pytorch models?
Remembering that this is the SEC, not the FBI, gives you a lot of context.
Like requiring that publicly own companies disclose known sources of income?
That seems to be main issue - they knew, but did not disclose.
Maybe one these things that are so obvious and hence not explicitly mentioned.
"(2)to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
(3)to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser."
On the other hand I know Nvida and others are sensitive to how they're perceived by non crypto folks and would / could even accidentally try to downplay how much the price / sales are driven by crypto.
But you really shouldn't do that in an earnings report.
Although I wonder if you can absorb the cost of an expensive GPU+power bill by reselling bitcoins, because I'm not sure it's profitable.