Nvidia Pulls Through Crypto Winter — Quarterly Earnings Rise 16% (#GotBitcoin?)
Major global chipmaker Nvidia, popular with cryptocurrency miners, has outstripped analysts’ expectations with its latest set of quarterly financials. Nvidia Pulls Through Crypto Winter — Quarterly Earnings Rise 16% (#GotBitcoin?)
The firm’s Second Quarter Fiscal 2020, published on Aug. 16, revealed $2.58 billion in revenue at earnings of $1.24 per share — as compared with $2.2 billion in the preceding quarter.
Still 17% Down From Crypto-Driven Highs
While the latest results reveal a solid 16% increase over the previous quarter, year-on-year revenue remains down by 17%. Nvidia had earned $3.12 billion during the same period for the fiscal year 2019 amid massive demand for GPUs from cryptocurrency miners.
The firm’s outlook for the forthcoming quarter is a higher revenue of $2.9 billion, give or take 2 percent.
Alongside developments in its GPU output, the firm also highlighted the progress of its artificial intelligence business, as well as the ongoing profitability of its gaming business segment, which remains the main driver of its revenue.
Buoyed by the latest quarterly results, Nvidia’s stock (NASDAQ: NVDA) rose by 6.2%.
Weathering The Crypto Seasons
This January, Nvidia had decreased its financial estimates for Q4 for the fiscal year of 2019, citing a decline in mining during the crypto bear market among its reasons.
In December 2018, a class action lawsuit was launched against Nvidia over the losses reported by the company when lower crypto prices diminished demand for GPUs by miners.
The extent of Nvidia’s crypto-driven success during the market’s historic bull run has been the subject of some controversy: earlier this year, a financial analyst claimed that between April 2017 to July 2018 the firm had in fact raked in $1.35 billion more in revenue from mining-related sales than officially stated.
During crypto winter this March, Nvidia said it would manage to sell off the surplus inventory it had accumulated in anticipation of continued mining-driven demand — stock that CEO Jensen Huang had characterized as a “crypto hangover.”
Nvidia Files Motion to Dismiss $1B Class Action Over Crypto GPU Sales
Nvidia has filed for the dismissal of a complaint alleging it fraudulently attributed over $1 billion in sales to gaming markets amid the 2017 crypto bubble.
Major manufacturer of graphics processing units (GPUs) and computing hardware Nvidia has filed a motion to dismiss a proposed class-action lawsuit alleging that the firm misrepresented more $1 billion in sales during 2017 and 2018.
In addition to its popular ‘GeForce’ and ‘GTX’ products — favored by both gamers and crypto miners — Nvidia launched a GPU specifically designed for virtual currency mining dubbed ‘Crypto SKU’ in May 2017.
However, Nvidia reported only its Crypto SKU sales as having been made to cryptocurrency miners, and investors claim this misrepresented $1.126 billion in other sales as having been driven by demand from the gaming market.
In the motion to dismiss, Nvidia asserts that statements issued by its executives made it clear to investors at the time that it was impossible to know the exact purpose for which customers were purchasing the GPUs.
Nvidia Rejects Amended Complaint From Investors
Nvidia cites an August 16, 2018 earnings call in which the firm’s founder and chief executive Jensen Huang stated “whether they buy it for mining or do they buy it for gaming, it’s kind of hard to say” in regards to the firm’s GeForce GPU sales.
As such, Nvidia claims that its executives did not lie when they described crypto sales as representing a “small” portion of its revenue, as alleged in the amended lawsuit.
The firm also emphasizes that the original complaint was dismissed due to the allegations relying “entirely” on a report produced by Prysm Group — with the court rejecting the suit on the basis of the plaintiffs’ failure to plead in favor of the “assumptions and analysis” laid out in the Prysm report.
Amended Complaint Relies On Flawed Data
Similarly, Nvidia asserts that the amended complaint fails by relying on the findings from a 2018 report into the impact of crypto mining on the firm’s sales that was authored by consulting firm Jon Peddie Research:
“The Jon Peddie estimate rests on a host of unidentified and unexplained assumptions and inputs, which the [first amended complaint] does not allege that Prysm investigated at all. This renders Prysm’s analysis even less reliable than before.”
The firm also claims that the complaint selectively quotes its executives to mischaracterize states made concerning its GPU sales, and fails to address shortcoming previously identified by the judge.
Nvidia Doesn’t Want To Give Up Its 2017 ‘Crypto Craze’ Docs
Nvidia is trying not to hand over internal documents to plaintiffs who allege that the GPU manufacturer misrepresented its financials during the 2017 bull run.
The legal representatives of technology company Nvidia have argued that its investors are not entitled to access its internal records about the “crypto craze” of 2017 and 2018.
During a trial in the United States’ Delaware Court of Chancery on Sept. 17, Nvidia’s counsel argued that the plaintiffs have failed to show a “credible basis” for why Nvidia should be compelled to hand over the requested company documents.
Nvidia is facing a class-action lawsuit alleging that it misled investors as to how much its revenue relied on crypto miners buying its graphics processing units amid the 2017 bull run.
Patrick Gibbs of Cooley LLP criticized the plaintiffs’ decision to “rest on a paper record” at trial without offering live testimony as to their purpose for demanding that Nvidia hand over its internal documents. He also argued that evidence has been presented proving that the investors behind the suit currently own stock in Nvidia and thus maintain an interest in the suit.
The court advised both parties to submit post-trial briefings addressing Nvidia’s argument for why it should not hand over its internal records.
The lawsuit alleges that Nvidia made “false and misleading public statements concerning the company’s internal controls, prospects, and earnings.” The suit also levies accusations that Nvidia simultaneously sold $147 million worth of its shares “at artificially inflated prices.”
The investors allege that after launching its GPU dedicated to cryptocurrency in May 2017, the Crypto SKU, Nvidia solely attributed the sales of the SKU to miners to demand from miners.
Additionally, the plaintiffs estimate that $1 billion worth of the company’s popular GeForce GPU sales that Nvidia claims were purchased by gamers in 2017 were actually purchased by crypto miners.
After the crypto bubble popped and demand from miners began to dry up, Nvidia’s struggled to offload its GPU inventories and saw a 30% crash in its stock price by the end of 2018.
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