Should investors be worried about Nvidia’s latest hack?
End of February, Nvidiait’s (NASDAQ: NVDA) internal network was hacked by a cybergang known as Lapsus$0. Hackers threatened to start leaking proprietary information if Nvidia refused to remove the lock from its GPUs that was slowing down cryptocurrency mining.
In this video clip of “Semiconductor revolution” on Motley Fool live, recorded on March 3, Motley Fool contributors Jose Najarro, Billy Duberstein and Nicholas Rossolillo discuss the hack and what it means for Nvidia investors in the short and long term.
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Jose Najarro: Nvidia says they have confirmed that there was an incident, that some of their proprietary information was leaked by hackers. The first thing is that Nvidia itself didn’t share much in the press release, they just have spokespersons talking with the media companies to show what’s going on. But if you go to social platforms, you can see a lot of information there. One of the things that gets leaked the most is employee information and employee references, which I think is nonsense. The second thing they leak is supposed that these hackers have proprietary information from Nvidia. Right now they’re saying that if Nvidia doesn’t respond to their requests by Friday, they’re going to release all of this information. I don’t remember if I have any demands on me right now, but I think it’s to have some of their graphics. For those familiar, Nvidia is known for its graphics processing units, and they recently slowed down the ability to mine cryptocurrency with their graphics cards. One of the requests is, “Hey, can you just release the information so that we, if we want to improve these graphics a bit, we can do that. If you don’t, we’ll just release all the information that we have for you at this time.” The funny thing is that there are a few hackers who made it known that we are responsible for hacking, and they also said that while they were hacking Nvidia, Nvidia responded by hacking them and locking down their computers . I found it pretty, I don’t know if funny is the word, but interesting in this remark. Let me go with Nick. Nick, do you have any thoughts on this hack, and are there any concerns for you. I don’t know if you’re an Nvidia investor, but if you were, are there any concerns you would have right now?
Nicholas Rossolillo: I have owned Nvidia for many years. I actually thought when they hacked the hackers, it’s really indicative of Nvidia’s culture. I appreciate the company and they are very confident and very sure of themselves, I think, in their future, because it is indicative of that. As far as concerns go, I think a lot of this act has to do with that. This is called the hashing algorithm, basically the speed at which you can mine cryptocurrencies with the GPU. Nvidia originally did. They reduced the hashing algorithm on their GPUs to make sure gamers got the GPUs because the last time the crypto market crashed in 2018 was a big reason why crypto s crashed, and then all of a sudden all this miner demand suddenly dried up. They basically wanted to get a head start on this and make sure people who wanted to play video games got the cards and cryptocurrency miners were second in line, I guess you could say. I think it’s small business for Nvidia. I think gaming is the majority, so I don’t know how important it is to the company. I am not personally concerned.
Najarro: Absoutely. As an investor, I’m not too worried at the moment. I think maybe if Nvidia doesn’t respond to requests, we’ll see a little more on Friday what they really have. Maybe we can just change our opinions there if anything else. Billy, any thoughts here?
Billy Duberstein: Not really. Nick is more of an Nvidia expert than I am. It sounds like you expected the hackers to be somewhere in South America, and it has to do with crypto. My lay opinion on this is that it’s not something to worry about long term. I don’t think there can be any proprietary data leaks, but it will still be difficult to replicate Nvidia’s chip and software ecosystem, I think. AMD and Intel, they have their own technology that they are working on. I don’t know if they are aware of some of this data. I don’t know if they could incorporate some of it into their workloads, but Nvidia has shown that it can innovate pretty quickly, so while unfortunate and maybe a little inconvenient, I wouldn’t necessarily let it change my long-term thesis on the company.
Najarro: Billy, I think you mentioned something really good. That’s even though there are competitors for Nvidia like AMD and Intel, they all work within their own form of architecture or platform that they build. Even though some of these companies, hey, take a look at what’s in this stuff. This does not necessarily mean that they can use it in any way. It is important. It’s pretty much like it’s probably not just in the semiconductor industry and in many big tech markets as well. The great thing is, maybe by the time they decipher this information, its new technologies are already here, so the innovation continues. I mean maybe push back some of those concerns here.
Billy Duberstein has no position in the stocks mentioned. Jose Najarro owns Advanced Micro Devices and Nvidia. Nicholas Rossolillo owns Advanced Micro Devices and Nvidia. The Motley Fool owns and recommends Advanced Micro Devices, Intel and Nvidia. The Motley Fool recommends the following options: $57.50 long calls on Intel in January 2023 and $57.50 short puts on Intel in January 2023. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.