A law firm in Los Angeles, California is encouraging investors who lost in excess of $100,000 by pouring money into NVIDIA's stock to contact the agency for participation in a possible class-action lawsuit. It's the position of the complaint that NVIDIA mislead shareholders by overstating its ability to weather the crumbling of the cryptocurrency market, as it pertains to mining with GPUs.
"[NVIDIA] made false and misleading statements to the market. NVIDIA touted its ability to monitor the cryptocurrency market and make rapid changes to its business as necessary. The Company claimed to be 'masters at managing our channel, and we understand the channel very well'. NVIDIA also claimed to the market that any drop off in demand for its GPUs amongst cryptocurrency miners would not negatively impact the Company’s business because of strong demand for GPUs from the gaming market," the complaint states.
"Based on these facts, the Company’s public statements were false and materially misleading throughout the class period. When the market learned the truth about NVIDIA, investors suffered damages," the complaint continues.
As many of you reading this might already be aware, cryptocurrency mining bolstered the demand for GPUs for much of last year. Both AMD and NVIDIA benefited from this to some extent. Even though gamers ultimately suffered for a period of time due to a shortage of graphics cards and inflated prices, the lawsuit doesn't take issue with this.
What the potential class-action suit does take issue with is the steep decline in NVIDIA's share price after the cryptocurrency bubble burst. For the most part, it stopped becoming profitable to mine cryptocurrencies like Ethereum using GPUs towards the end of 2018.
Whether entirely related or not, NVIDIA's share price has seen a precipitous drop over the past few months. The company is currently trading at $133.50, which is down from over $200 in mid-November, and much lower than its high of nearly $300 in early October.
As a result, the Schall Law Firm is inviting shareholders who purchased shares in NVIDIA between August 10, 2017 and November 15, 2018 to contact the firm before February 19, 2019, to participate in the lawsuit and "recover your losses."
From our vantage point, Schall Law Firm has an uphill battle to climb. The cryptocurrency craze (and subsequent crash, of sorts) was a unique situation. If nothing else, it feels like this sort of lawsuit is jumping the gun, given that NVIDIA stated in November that it had excess stock on its hands.
"Our near-term results reflect excess channel inventory post the crypto-currency boom, which will be corrected. Our market position and growth opportunities are stronger than ever. During the quarter, we launched new platforms to extend our architecture into new growth markets—RAPIDS for machine learning, RTX Server for film rendering, and the T4 Cloud GPU for hyperscale and cloud," NVIDIA said.
We'll have a better picture of NVIDIA's GPU sales when it posts its next earnings report, which will likely be in February. It will also take some time to see what impact NVIDIA's new Turing GPU and GeForce RTX series has on its bottom line. While there has been some blow back from gamers over the comparatively high prices of NVIDIA's newest graphics cards, the company is getting ready to introduce a more affordable model, the GeForce RTX 2060, which is rumored to start at $349.