NVIDIA, giant player in the GPU (graphic processing unit) market, faces a lawsuit mounted against it by The Schall Law Firm. GPUs are key for many areas of computing. In most recent times, they were used to mine cryptocurrencies by miners around the world. As well as this, GPUs are important for the online gaming market also. NVIDIA is an American based tech company that produces these GPUs. However, due to the large losses encountered by the crypto market following the bull run in 2018, NVIDIA is facing backlash. The Shall Law Firm is a shareholder rights litigation firm based in America. On its website, it is asking purchasers of NVIDIA stock from 10th August 2017 to 15th November 2018 that incurred losses from their investment “in excess of $100,000” to reach out to The Shall Law Firm. The crypto mining hardware giant has incurred the anger of investors as a result of poor performance reports following their 15th November 2018 earnings report. This was due to misleading claims by the company as well as market conditions. This lawsuit is shaping up to be one of the biggest that will develop in 2019 in the crypto mining hardware space.
Lawsuit Background: False Claims Delivered by Crypto Mining Hardware Producer NVIDIA
The Schall Law Firm alleges that the company NVIDIA made false claims which resulted in losses for investors. These investors were misled by these false statements, according to the law firm. Despite the volatility of the market, NVIDIA claimed that it could monitor the cryptocurrency market and rapidly change when necessary. This is outlined in The Shall Law Firm’s press release on its website, in which the claims are stated. One of these claims includes the boast that NVIDIA claimed they were, “masters at managing our channel, and we understand the channel very well.” This relates specifically to crypto mining hardware and the GPUs they were producing in the booming marketplace at the time. The Schall Law Firm’s press release outlines how NVIDIA weren’t as concerned about a downturn in the crypto mining hardware market as they should have been. A claim was made that the demand for GPUs in NVIDIA’s gaming market would offset any losses from crypto currency miners. Ultimately as miners stopped mining due to market conditions, the demand for GPUs began to slow down. This ultimately resulted in a loss of sales greater than what NVIDIA expected the gaming market to be able to absorb.
How Investors in Crypto Mining Hardware Production Were Harmed
NVIDIA is a publicly traded company. Large shareholders experienced huge financial losses resulting from the downturn in demand for crypto mining hardware. The lawsuit against NVIDIA is ultimately to seek compensation for these investors. In the tail-end of 2018, the company reported huge losses. The crypto mining hardware giant ultimately reported a decline of more than 7%, instead of the 17% growth expected by investors. The overall bear market impacted NVIDIA’s sales significantly, which had a knock-on effect to its share price. This ultimately resulted in tangible losses. The announcement of such a steep loss impacted the share price significantly. For example, the price stood at $202 on November 15th and descended down to $144 on November 19th. This is a significant drop in every investor’s portfolio. This trend continued its bearish sentiment even down to January. At its lowest, the stock price dipped to $136 on the 4th January. At its peak in October, NVIDIA shares stood at $290 on 1st October.
Crypto Mining Hardware and GPUs
GPUs were once the de-facto choice for all crypto mining. Bitcoin mining difficulty was once much lower than it is now. In Bitcoin’s early existence, GPU gaming rigs were the perfect way to mine Bitcoin. While GPUs are still used to mine smaller, less popular coins, the market has moved on other alternative crypto mining hardware. Other types of crypto mining hardware offer better performance for mining coins. For larger market cap coins such as Bitcoin or Ethereum, GPU mining has become largely unsustainable. Susquehanna analysed Ethereum mining and found that profitability for GPU miners dropped to $0 by November 2018. This doesn’t mean GPUs are obsolete, rather they have different use cases, possibly for smaller coins. NVIDIA produces GPUs for both the cryptomining and gaming markets. However, the fall in profitability for these miners crushed NVIDIA’s options for competing in the market. According to some rumours NVIDIA overstepped its estimate of crypto mining sales and was forced to recall 300,000 GPUs.
As we enter 2019, NVIDIA’s lawsuit will be an interesting case to follow. Clearly bear market had a big impact on GPU mining sales. This was felt acutely by NVIDIA investors, who now seek some reprieve for their losses and being misled. The Shall Law Firm has made clear that NVIDIA made claims that misled investors. When these claims never materialized many parties suffered the consequences. One thing is clear, the lawsuit will be interesting to follow in 2019 and beyond.
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