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Don’t let the SEC’s crypto fine keep you away from NVDA stocks


  • SEC fined Nvidia Corporation (NVDA) for failing to educate investors about the impact of cryptocurrency mining on its business.
  • NVDA shares fell on the news, which was announced on May 6.
  • Investors should ignore the implications (for reasons I’ll explain) and treat this as selling Nvidia stock.

Source: Pe3k / Shutterstock.com

Nvidia Corporation (NASDAQ:NVDA) has strong ties to crypto mining. Parallel processing – a factor in a computer’s ability to mine cryptography – happens to be the strong point of graphics cards made by Nvidia. And for a while, sales of graphics cards to crypto miners had an outsized impact on NVDA’s stock.

That was in 2018. However, more recently, the US Securities and Exchange Commission (SEC) came after Nvidia for failing to properly disclose the impact of crypto mining on its business. On May 6, the SEC announced that Nvidia was being fined $5.5 million. NVDA stock fell 9% the following day.

At $169.50, this was a new closing low for NVDA stock in 2022, a year that has already been a bad one for most tech stocks. And it’s hit lower closing lows since. However, the SEC action is no reason to avoid NVDA. On the contrary, for long-term investors, this decline in Nvidia stock was a gift. This opens the door to an opportunity to buy Nvidia shares at the best price in nearly a year.

NVDA Nvidia Corporation $177.06

I said it before, it’s not 2018

There have been twists at hand about Nvidia and the close relationship between crypto mining and graphics cards in the past. Last year, when many cryptocurrencies crashed, I reassured investors that 2021 would not be a repeat of 2018.

Do you remember 2018? If you owned NVDA shares, I bet you do. Crypto miners had purchased Nvidia graphics cards aimed at the PC gaming market. It was a significant and temporary increase in company revenue. When cryptos crashed in 2018, the market faced a glut of graphics cards. NVDA action crashed.

Hard.

This is not 2018. Nvidia is now selling graphics cards aimed specifically at crypto mining. They are of little use to players. The company also hampered the processing power of its standard graphics cards if someone tried to use them in a crypto-mining rig. The crypto industry is insulated and other Nvidia businesses are insulated from its impact. We know how much of Nvidia’s business is directly related to crypto and it’s not huge – just $24 million last quarter (out of $7.64 billion in revenue).

Additionally, the SEC fine was specific to Nvidia’s 2018 reports.

NVDA stock still has plenty of growth in the tank

I hope I made the point that potential investors in NVDA stock shouldn’t sweat that fine from the SEC.

As for Nvidia, the performance of the company’s stock in 2022 does not reflect the performance of the company itself. NVDA stock sank in 2022. However, in its last quarter (reported in February), Nvidia itself did very well.

Revenue increased 53% year over year. Revenue of $7.64 billion was a record. Additionally, the company’s Gaming, Data Center, and Professional Visualization divisions all posted record quarterly revenue. GAAP earnings per diluted share of $1.18 increased 103% year-on-year, hitting another record high.

Look to the future and we see continued demand for graphics cards, growing data center activity, and increased demand for advanced chips from automakers. Additionally, the metaverse is beckoning and Nvidia chips are a key part of every aspect – content creation, PC access and servers needed to host the virtual worlds.

NVDA stock lost momentum in a trying 2022, but not Nvidia, the company.

Conclusion: Should You Buy NVDA Stock?

Plug the NVDA stock into portfolio binder and you’ll find it gets an “A” rating. It’s a strong buy. The main concern with this stock is its moderate volatility risk – that’s the 2022 story.

Verification with the The Wall Street Journal, tracked investment analysts rated NVDA as a consensus “overweight”. They have an average price target of $322.21. This is actually lower than the price shares reached last November, but it still represents an increase of around 85%. This largely reflects the beating NVDA stock has had through the end of 2021 and most of 2022 to date. But it is also recognition that this is a company whose products are in huge demand, and which should be even more so in the future.

The SEC crypto mining fine? Ignore it. That was in the past, and the company has gone to great lengths since then to isolate crypto mining from its other activities.

It’s awfully tempting to see an ‘A’ rated action with Nvidia’s proven performance so heavily reduced. NVDA stocks would be a great addition to your growth portfolio.

As of the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier has held (neither directly nor indirectly) any other position in the securities mentioned in this article. The InvestorPlace research staff member primarily responsible for this article has not held (directly or indirectly) any position in the securities mentioned in this article.

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