NVIDIA’s Crypto Mining Case Reopened: A Hidden Chapter in the AI Giant’s History

Recently, Nvidia faced a collective lawsuit from investors, accused of concealing over $1 billion in 暗号currency mining revenue, drawing market attention.

This long-standing lawsuit has once again pulled market focus back to that era of the frenzied nationwide gold rush. Today’s AI empire, Nvidia, was a direct beneficiary of that craze at the time.

Accused of Hiding Over $1 Billion in Mining Revenue, Years-Long Collective Lawsuit Officially Advances

A U.S. federal judge has approved a collective lawsuit against Nvidia and its CEO, Jensen Huang.

According to the plaintiffs, between 2017 and 2018, Nvidia concealed the extent to which its gaming graphics card revenue relied on cryptocurrency mining demand.

The lawsuit was initially filed by investors in 2018 and was dismissed in 2021. Following an appeal and retrial, Nvidia’s appeal to the U.S. Supreme Court was not accepted, and the case has now officially received collective action certification.

The plaintiffs allege that Nvidia generated over $1 billion in cryptocurrency-related revenue through its GeForce gaming graphics cards but accounted for most of it under the “Gaming” segment, thereby downplaying the risk disclosure to investors. Investors accuse CEO Jensen Huang of downplaying the true scale of cryptocurrency demand at the time. Nvidia had previously consistently claimed that cryptocurrency mining constituted only a small part of its business and that Gaming revenue primarily came from gamers.

The plaintiffs point out that this practice directly exposed the company to the risks of cryptocurrency market cycle fluctuations. Particularly after the company issued a corrective disclosure in November 2018, its stock price fell by approximately 28.5% over two days.

More crucially, the court’s ruling cited an internal email from an Nvidia vice president, finding the evidence particularly compelling. The judge noted that an internal executive had stated, “the company’s stock price remained high precisely because of previous related statements,” indicating that such remarks had an impact on the stock price.

In fact, as early as 2022, the U.S. SEC had charged Nvidia with failing to adequately disclose the impact of cryptocurrency mining on its gaming business, believing that its financial reports for two quarters may have misled investors. Nvidia neither admitted nor denied the SEC’s charges but agreed to pay a $5.5 million fine and reach a settlement.

The newly approved collective lawsuit covers investors who purchased Nvidia stock between August 10, 2017, and November 15, 2018. The court plans to hold a case management conference on April 21, where the judge will clarify the subsequent litigation process.

Once in the Crypto Gold Rush: Nvidia’s Mining History

Rewind to the 2017 bull market. Mining rigs were snapped up, chips were in short supply, and countless prospectors flocked to Bitcoin mining.

At that time, Nvidia was best known for its gaming graphics card business. However, as the prices of cryptocurrencies led by Bitcoin and Ethereum skyrocketed, the graphics card market faced severe shortages and was chronically out of stock. Nvidia’s GPU products were naturally in high demand, even leading to a situation where ordinary gamers struggled to get their hands on a card.

By 2020, a new bull market reignited mining enthusiasm. This time, Nvidia took the initiative, launching CMP (Cryptocurrency Mining Processor) cards specifically designed for mining to meet the special demands of Ethereum mining, and imposed mining performance limits on the RTX 3080 aimed at gamers. Yet, even this could not curb the miners’ fervent demand. According to Nvidia’s disclosure, in Q1 2021 alone, sales of CMP mining-specific chips reached $155 million for the quarter, while the global market size for discrete graphics cards flowing into crypto mining during the same period was approximately $500 million.

Clearly, this mining boom filled Nvidia’s coffers. However, how much of this revenue actually came from miners has always been a mystery. In Nvidia’s financial reports, mining profits were categorized under the gaming segment, making it difficult for outsiders to accurately dissect its true structure.

But looking at revenue, mining indeed “carried” Nvidia at the time. In 2018 alone, Nvidia’s operating revenue reached $9.714 billion, a 41% year-on-year increase, with the gaming business contributing over half (approximately $5.5 billion). Interestingly, Bitmain, a mining company founded just a few years prior, was rapidly expanding during the same period, with profits once approaching Nvidia’s, and Nvidia was one of its suppliers.

However, this portion of earnings was heavily impacted by crypto cycle fluctuations. After the mining demand plummeted in 2022, it also led to a decline in Nvidia’s sales and inventory surplus, with the gaming business becoming the main segment dragging down its overall performance, and the drop in GPU sales was a key reason. Interestingly, Nvidia’s CTO Michael Kagan stated bluntly in 2023 that cryptocurrency does not bring anything useful to society, and that the emergence of something like ChatGPT represents the “iPhone moment” for AI.

Since then, Nvidia’s AI rise story has become widely known, becoming the strongest “shovel seller” in the AI era, selling a new kind of token. Meanwhile, the once effortlessly profitable mining companies have also begun turning their attention to the AI business.

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