Opinion ID: 6501086
Heading Depth: 2
Heading Rank: 2

Heading: The Earnings Calls and Stock Sales

Text: From mid-2017 to late-2018, NVIDIA executives made a series of statements in various earnings calls about the effect of crypto mining on the channel and NVIDIA’s revenue and about NVIDIA’s ability to manage the increasing demand for Gaming GPUs. These statements, detailed below, are the basis for various lawsuits against NVIDIA, including this action. On an August 10, 2017 earnings call, NVIDIA executives discussed an increase in GPU sales driven by a spike in cryptocurrency prices.16 During the call, 10 Id. 11 Id. 12 Id.; A403. 13 Opening Br. 7. 14 A530. 15 Id. 16 Ex. A at 6. 6 Jensen Huang, NVIDIA’s CEO, stated, “There’s still small miners that buy Gaming GPUs here and there, and that probably also increased the demand of Gaming GPUs. . . . [T]here’s still cryptocurrency mining demand that we know is out there.”17 Collette Kress, NVIDIA’s CFO, agreed that GPU sales “were lifted by demand from increasing mining activity” and noted that NVIDIA’s “strategy is to stay alert to this fast-changing market . . . .”18 On November 9, 2017, during an earnings call, Kress suggested that NVIDIA “remains nimble in [its] approach to the cryptocurrency market.”19 During a February 8, 2018 earnings call, Kress stated that miners were buying both Crypto GPUs and Gaming GPUs.20 On this call, Huang stated that gamers’ difficulty in purchasing Gaming GPUs due to the spike in crypto mining was leading to “fairly sizeable pent-up demand . . . .”21 During earnings calls on May 10, 2018, and August 16, 2018, Huang and Kress expressed optimism that “the gaming demand is strong” because there was still pent-up demand for Gaming GPUs from gamers.22 During the August call, Huang stated that “channel inventory would work itself out” and “we’re not 17 Id. 18 Id. 19 App. to the Answering Br. 59 (hereinafter “B__”). 20 A398. 21 Id. 22 A530, 539; Ex. A at 7. 7 concerned about channel inventory.”23 Huang also stated that “‘the larger of a GPU company you are, the greater ability you could [sic] absorb the volatility [and] because we have such large volumes, we have the ability to rock and roll with this market as it goes.’”24 Between August 11, 2017, and September 28, 2018, NVIDIA’s stock price rose from $155.96 to $281.02 per share.25 On September 6, 2017, Huang sold 110,000 shares of NVIDIA for $18.2 million.26 And, pursuant to a 10b-5 plan, Kress sold 36,333 shares for $7.7 million between October 2017 and September 2018.27 On November 15, 2018, NVIDIA announced that the pent-up gaming demand it predicted had not materialized, leading to excess inventory in the channel and a revenue miss.28 Huang stated that “excess channel inventory . . . declined slower than we expected and – but while it was declining, we were expecting sales volume to grow, demand to grow and for pricing to be – for volume to be elastic with pricing.”29 NVIDIA’s stock price declined 28.5 percent in the days following the call.30 On November 19, 2018, NVIDIA closed at $144.70 per share.31 23 Ex. A at 7-8. 24 A43. 25 A42. 26 A49. 27 See id. 28 A568. 29 Id. 30 A37. 31 A48. 8 On January 28, 2019, NVIDIA lowered its earnings estimate for the fourth quarter of 2019, explaining that “[t]he Q4 guidance [] in November reflected the effect of excess channel inventory of Pascal mid-range GPUs that resulted from the sharp decline of cryptocurrency demand. We delayed the planned production ramp of several new products to allow excess channel inventory to deplete, which resulted in the significantly lowered Q4 guidance.”32 On February 14, 2019, NVIDIA announced that Gaming GPU revenue for the fourth quarter was down forty-five percent year-over-year and forty-six percent quarter-over-quarter.33 By November 2019, NVIDIA’s stock price returned to over $200 per share.34