WASHINGTON—
Nvidia Corp.
has agreed to pay $5.5 million to settle a regulatory investigation that found it didn’t adequately reveal the impact of cryptomining on its sales of powerful chips designed for computer gaming.
The Securities and Exchange Commission said Nvidia’s sales of its graphics processing units, or GPUs, were materially boosted in 2018 by consumers who bought them to mine new units of cryptocurrencies. Nvidia kept investors in the dark about that fact over two quarters, depriving shareholders of information they needed to understand its future financial performance, the SEC said Friday.
Nvidia, which is based in Santa Clara, Calif., settled the SEC’s allegations without admitting or denying the claims. A spokesperson for the company declined to comment. Nvidia’s shares were down about 1.5% at $185.50 on Friday midmorning.
Nvidia’s powerful GPUs have been popular with people who use them to run complex mathematical functions that unlock new units of cryptocurrencies such as ether. The company now produces GPUs designed specifically for cryptomining operations.
Prior to 2018, cryptomining didn’t meaningfully impact Nvidia’s sales of GPUs, the SEC said. That changed in early 2018, when rising prices for cryptocurrencies drove greater demand for Nvidia’s GPUs, particularly in China, the SEC said in a settlement order.
The company’s gaming revenue, which included sales of chips used for cryptomining, rose 52% in the second quarter of 2018 compared with the same period one year prior, and 25% during the third quarter of that year, the SEC said. Investors and analysts who followed the company “routinely asked senior management about the extent to which increases in gaming revenue during this time frame were driven by cryptomining,” according to the SEC’s order.
Public companies are supposed to disclose known trends and uncertainties that can materially impact their financial performance, but Nvidia didn’t report the big influence of cryptomining on gaming sales until the end of its 2018 fiscal year, the SEC said.
“Nvidia’s disclosure failures deprived investors of critical information to evaluate the company’s business in a key market,” said Kristina Littman, chief of the SEC’s Crypto Assets and Cyber Unit.
Write to Dave Michaels at [email protected]
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