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I'm confused about why this matters. From anecdotal experience, Nvidia seems to be struggling to meet demand for its products right now anyways. It's hard to te

by _jab 4y ago

I'm confused about why this matters. From anecdotal experience, Nvidia seems to be struggling to meet demand for its products right now anyways. It's hard to tell, but I assume that even if crypto took a major hit, Nvidia could still sell a good chunk of its newfound supply to genuine gamers instead. Alternatively, they could invest more into their ML-focused chips instead, which are also supply constrained. Granted, this might not have been true in 2018, which appears to be what the SEC's charge is focused on. Nonetheless, I don't think the huge amount of demand from crypto for Nvidia's products should be construed as a bad thing; there's plenty of other demand.

Tuna-Fish 4y ago
Companies are not allowed to lie to their investors. Part of the deal of being a public company is that all communication is communication with their investors. If they told their investors that they were selling GPUs to gamers, while in fact selling most of them to miners, they violated the law. The principle of it being that said investors might have had a different outlook on the company depending on who they were selling to. Besides, there is a difference. Because whenever crypto collapses (and it has twice already in the past), a lot of the existing mining GPUs end up on the secondary market. If this happens now, it will have a material impact on the prices of GPUs going forwards.
- mschuster91 4y ago
  On the other hand, NVIDIA does not have legal authority to control where its GPUs actually end up being used (nasty things like drivers shutting down when detecting virtualizations aside). How can anyone prove or disprove that a specific percentage of GPUs end up in a specific market, as long as NVIDIA can prove they have kept their usual delivery targets towards wholesale distributors?
  - dematz 4y ago
    This is a good question. I remember having to give my identity before walking out of a store with a computer with a GPU in it, and if someone really wanted to buy multiple GPUs for mining that wouldn't stop them. The SEC lists some facts suggesting nvidia thought they were ending up mining (https://www.sec.gov/litigation/admin/2022/33-11060.pdf https://www.sec.gov/litigation/admin/2022/33-11060.pdf): "NVIDIA launched a product line of cryptomining processors, known as “CMP,” which the company marketed to large cryptomining operations ... Based on known CMP sales, the company identified cryptomining as a significant element of the OEM GPU sales" "NVIDIA also received information indicating that cryptomining was a significant factor in year-over-year growth in NVIDIA’s Gaming GPUs revenue. Some of the company’s sales personnel, in particular in China, reported what they believed to be significant increases in demand for Gaming GPUs as a result of cryptomining" These were the 2 most concrete points to me - management was aware miners drove up GPU prices for gamers and saw it as another big market to capture, and sales attributed increased demand to miners. The rest of it basically says crypto grew, nvidia sales grew, and nvidia thought sales grwe because of crypto. Honestly, I'm not sure it's possible even knowing these factors to know who really bought the GPUs or where they really ended up, but idk all the SEC probably cares about is nvidia not disclosing material seeming information.
  - simiones 4y ago
    That is irrelevant. The SEC also didn't go and check what people were using their NVIDIA GPUs for. The problem is that NVIDIA leadership knew/believed that a proportion X of their GPUs were being bought for crypto mining (thus tying demand with crypto prices), while they reported to investors a different number, Y, with Y < X. This is material information that they simply lied about, which is illegal for a publicly traded company. In fact, the lawsuit could have happened even if Y > X. If NVIDIA had reported the same numbers they did, and people had been in fact using them at the same rate that they did, but NVIDIA hadn't known about it, then nothing illegal would have happened. If NVIDIA had later found out and disclosed this to investors, again no lawsuit (though perhaps share prices would have changed, one way or another).
- ajdegol 4y ago
  I certainly wouldn't want a second hand GPU that'd been used for mining; it'd be ragged.
  - viraptor 4y ago
    Often repeated, but wherever you actually see someone testing that theory, they can't spot any issues.
  - deadbunny 4y ago
    Is there any evidence that running a GPU/CPU at 100% for X years degrades the product vs average use over the same period?
    - colejohnson66 4y ago
      No; there's been many tests. The mistake seems to come from thinking GPUs "wear out" like cars. The cooler might, but the silicon is fine. Some even suspect that crypto mining is better for the card than gaming as it avoids the constant ramp-up/ramp-down of the clock/activity by keeping it pegged at 100%. In turn, that would lower thermal stress.
      - remram 4y ago
        > GPUs aren’t cars I think another comparison is with hard drives, which are also used by some cryptocurrency schemes, and do degrade faster with intensive use.
        colejohnson66 4y ago
        Yes, because hard drives, like cars, have moving parts that can wear out.[a] The silicon of a GPU doesn't have moving parts and is therefore more resilient. [a]: It's (hopefully) common knowledge in the tech community that purchasing used hard drives is a Bad Idea(TM)
        4y ago
- dangerface 4y ago
  > they told their investors that they were selling GPUs to gamers, while in fact selling most of them to miners I don't think nvidia even did this, they marketed to gamers and reported the correct number of sales. What people do with the card once its sold is not up to nvidia its not information that an investor can reasonable assume nvidia will report on. If I invest in a steel mine they market their steel to car manufactures and report the correct number of sales. If they also happen to sell to gun manufactures I can't then sue said company for not reporting that.
  - runeks 4y ago
    > I don't think nvidia even did this, they marketed to gamers and reported the correct number of sales. It’s not about that. It’s about: “NVIDIA had information, however, that this increase in gaming sales was driven in significant part by cryptomining.” Which they did not disclose.
    - davedx 4y ago
      > “NVIDIA had information, however, that this increase in gaming sales was driven in significant part by cryptomining.” > Which they did not disclose. What's annoying to me as an NVDA investor is that I still don't have that information. Or maybe it can be found somewhere else?
TheBigSalad 4y ago
It matters because people asked the question about how much of the business was crypto based and they lied.
PragmaticPulp 4y ago
GPU mining was consuming much more of the supply than you suggest (that’s literally the basis of this lawsuit) When the GPU mining bubble pops, there’s a secondary effect as miners unload their used GPUs at fire sale prices on the secondary market. This means that the demand reduction is even worse than it might seem.
paxys 4y ago
What about a year or so later when supply chains are back to normal and crypto demand dries up? Suddenly investors are wondering why their revenues are falling 50% instead of 5% that they predicted.
babypuncher 4y ago
A better question to ask is "why did Nvidia feel it was necessary to lie to their investors?". Lying to your investors is illegal, regardless of whether or not you profited from it.

by _jab 4y ago

Tuna-Fish 4y ago

Companies are not allowed to lie to their investors. Part of the deal of being a public company is that all communication is communication with their investors. If they told their investors that they were selling GPUs to gamers, while in fact selling most of them to miners, they violated the law. The principle of it being that said investors might have had a different outlook on the company depending on who they were selling to. Besides, there is a difference. Because whenever crypto collapses (and it has twice already in the past), a lot of the existing mining GPUs end up on the secondary market. If this happens now, it will have a material impact on the prices of GPUs going forwards.

mschuster91 4y ago
On the other hand, NVIDIA does not have legal authority to control where its GPUs actually end up being used (nasty things like drivers shutting down when detecting virtualizations aside). How can anyone prove or disprove that a specific percentage of GPUs end up in a specific market, as long as NVIDIA can prove they have kept their usual delivery targets towards wholesale distributors?
- dematz 4y ago
  This is a good question. I remember having to give my identity before walking out of a store with a computer with a GPU in it, and if someone really wanted to buy multiple GPUs for mining that wouldn't stop them. The SEC lists some facts suggesting nvidia thought they were ending up mining (https://www.sec.gov/litigation/admin/2022/33-11060.pdf https://www.sec.gov/litigation/admin/2022/33-11060.pdf): "NVIDIA launched a product line of cryptomining processors, known as “CMP,” which the company marketed to large cryptomining operations ... Based on known CMP sales, the company identified cryptomining as a significant element of the OEM GPU sales" "NVIDIA also received information indicating that cryptomining was a significant factor in year-over-year growth in NVIDIA’s Gaming GPUs revenue. Some of the company’s sales personnel, in particular in China, reported what they believed to be significant increases in demand for Gaming GPUs as a result of cryptomining" These were the 2 most concrete points to me - management was aware miners drove up GPU prices for gamers and saw it as another big market to capture, and sales attributed increased demand to miners. The rest of it basically says crypto grew, nvidia sales grew, and nvidia thought sales grwe because of crypto. Honestly, I'm not sure it's possible even knowing these factors to know who really bought the GPUs or where they really ended up, but idk all the SEC probably cares about is nvidia not disclosing material seeming information.
- simiones 4y ago
  That is irrelevant. The SEC also didn't go and check what people were using their NVIDIA GPUs for. The problem is that NVIDIA leadership knew/believed that a proportion X of their GPUs were being bought for crypto mining (thus tying demand with crypto prices), while they reported to investors a different number, Y, with Y < X. This is material information that they simply lied about, which is illegal for a publicly traded company. In fact, the lawsuit could have happened even if Y > X. If NVIDIA had reported the same numbers they did, and people had been in fact using them at the same rate that they did, but NVIDIA hadn't known about it, then nothing illegal would have happened. If NVIDIA had later found out and disclosed this to investors, again no lawsuit (though perhaps share prices would have changed, one way or another).
ajdegol 4y ago
I certainly wouldn't want a second hand GPU that'd been used for mining; it'd be ragged.
- viraptor 4y ago
  Often repeated, but wherever you actually see someone testing that theory, they can't spot any issues.
- deadbunny 4y ago
  Is there any evidence that running a GPU/CPU at 100% for X years degrades the product vs average use over the same period?
  - colejohnson66 4y ago
    No; there's been many tests. The mistake seems to come from thinking GPUs "wear out" like cars. The cooler might, but the silicon is fine. Some even suspect that crypto mining is better for the card than gaming as it avoids the constant ramp-up/ramp-down of the clock/activity by keeping it pegged at 100%. In turn, that would lower thermal stress.
    - remram 4y ago
      > GPUs aren’t cars I think another comparison is with hard drives, which are also used by some cryptocurrency schemes, and do degrade faster with intensive use.
      - colejohnson66 4y ago
        Yes, because hard drives, like cars, have moving parts that can wear out.[a] The silicon of a GPU doesn't have moving parts and is therefore more resilient. [a]: It's (hopefully) common knowledge in the tech community that purchasing used hard drives is a Bad Idea(TM)
        4y ago
dangerface 4y ago
> they told their investors that they were selling GPUs to gamers, while in fact selling most of them to miners I don't think nvidia even did this, they marketed to gamers and reported the correct number of sales. What people do with the card once its sold is not up to nvidia its not information that an investor can reasonable assume nvidia will report on. If I invest in a steel mine they market their steel to car manufactures and report the correct number of sales. If they also happen to sell to gun manufactures I can't then sue said company for not reporting that.
- runeks 4y ago
  > I don't think nvidia even did this, they marketed to gamers and reported the correct number of sales. It’s not about that. It’s about: “NVIDIA had information, however, that this increase in gaming sales was driven in significant part by cryptomining.” Which they did not disclose.
  - davedx 4y ago
    > “NVIDIA had information, however, that this increase in gaming sales was driven in significant part by cryptomining.” > Which they did not disclose. What's annoying to me as an NVDA investor is that I still don't have that information. Or maybe it can be found somewhere else?

TheBigSalad 4y ago

It matters because people asked the question about how much of the business was crypto based and they lied.

PragmaticPulp 4y ago

GPU mining was consuming much more of the supply than you suggest (that’s literally the basis of this lawsuit) When the GPU mining bubble pops, there’s a secondary effect as miners unload their used GPUs at fire sale prices on the secondary market. This means that the demand reduction is even worse than it might seem.

paxys 4y ago

What about a year or so later when supply chains are back to normal and crypto demand dries up? Suddenly investors are wondering why their revenues are falling 50% instead of 5% that they predicted.

babypuncher 4y ago

A better question to ask is "why did Nvidia feel it was necessary to lie to their investors?". Lying to your investors is illegal, regardless of whether or not you profited from it.