Disclose the effects of cryptocurrency mining NVIDIA Corporation (NVDA), a manufacturer of graphics processing units, has agreed to pay $5.5 million to resolve charges brought by the Securities and Exchange Commission (SEC), which alleged that the company misled investors by concealing the high demand for its products from cryptocurrency miners. Verifying transactions on decentralized blockchain ledgers is known as “crypto mining,” which yields rewards in bitcoin.
In a settlement agreement of $5.5 million, NVIDIA said it had misled investors by concealing the high demand for its graphics cards from bitcoin miners.
The SEC stated that NVIDIA omitted to mention that cryptocurrency mining contributed significantly to revenue growth in two consecutive quarters during its fiscal year 2018.
CONCLUSIONS AND RECOMMENDATIONS:
NVIDIA introduced the Cryptocurrency Mining Processor (CMP) line of chips in March 2021; these were developed to facilitate the mining of Ether.
Similar to the steep decline in cryptocurrency values, demand for the company’s CMP hardware has plummeted.
On Friday, May 6, the Financial Industry Regulatory Authority (FINRA) announced its charges against Santa Clara, California-based NVIDIA, alleging that the company misled investors by concealing the fact that crypto mining had contributed significantly to revenue growth in two consecutive quarters during its 2018 fiscal year from the sale of its graphics processing unit (GPUs) designed and marketed for gaming.
The gaming segment of the chip maker reported a 52% and 25% growth in revenue during the second and third quarters of that year, respectively, as compared to the corresponding quarters in the previous year.
Kristina Littman, head of the SEC Enforcement Division’s Crypto Assets and Cyber Unit, said, “NVIDIA’s disclosure violations robbed investors of crucial information to assess the company’s operations in a vital market.” She also stressed the need for timely, comprehensive, and accurate disclosures for all issuers, especially those interested in prospects utilizing new technologies.
A Custom-Built Chip for Cryptocurrency Mining:
At the height of the ’21 March cryptocurrency bull market, chipmaker NVIDIA introduced a new line of products dubbed Cryptocurrency Mining Processors (CMP), optimized for mining Ether (ETH). This digital asset fuels the Ethereum network. The company’s graphics cards are ideal for running the mining algorithms necessary to generate Ether, the cryptocurrency. The semiconductor manufacturer has also included anti-crypto mining software on its gaming graphics cards.
NVIDIA’s graphics cards were in high demand during the epidemic because people stayed home from work and school to play video games. In 2020 and early 2021, the firm had a severe shortage of graphics chips due to increased demand from cryptocurrency miners.
Amid the crypto winter, CMP mining chips slump.
NVIDIA’s most recent quarter saw gaming contribute 45% of total revenue, although CMP chip sales fell significantly.
With the decrease in cryptocurrency values, the firm reported a 77% decline in income from crypto-mining hardware between the third and fourth quarters of 2021.
When the chip manufacturer publishes profits on May 25, investors will get the latest CMP sales figures. As of this writing, Bitcoin (BTC) and Ether have lost over 30% of their value since the beginning of the year, suggesting that conditions have remained difficult.
A Convenient Web3 Digital Wallet:
On Friday, May 6, NVIDIA stock fell 0.9%, hitting a new low not seen since last July. The stock has dropped 36.5% this year, lagging both the iShares Semiconductor ETF (SOXX) and the tech-heavy Nasdaq by about 12% and 14%, respectively.
The author did not own any of the securities above at the time of writing.
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