US Supreme Court to review Nvidia shareholder lawsuit
The Supreme Court has agreed to review Nvidia’s request to dismiss a securities fraud lawsuit.
The class action lawsuit, now under the scrutiny of the Supreme Court, alleges that Nvidia and its CEO, Jensen Huang, misled investors by misrepresenting the portion of its sales dedicated to crypto industry-related activities.
The lawsuit, brought by shareholders in California, seeks unspecified monetary damages.
“The Company made false and misleading statements to the market. NVIDIA claimed it monitors the cryptocurrency markets in real-time and rapidly makes the necessary adjustments to its business,” the lawsuit read. “NVIDIA also claimed that a drop in demand for its GPUs amongst miners would not have an adverse impact on its business because there is also strong demand for GPUs from the gaming industry.”
The Supreme Court’s decision to review this case may make it more difficult for shareholders to file lawsuits for securities and financial fraud against companies in which they are invested.
Nvidia lawsuit background
In a lawsuit filed in 2018, plaintiffs accused Nvidia and top company officials of violating the U.S. Securities Exchange Act of 1934 by allegedly making false statements in 2017 and 2018 that downplayed the extent to which Nvidia’s revenue growth was driven by crypto-related purchases. Nvidia’s chips have gained popularity for their use in crypto mining.
The plaintiffs claimed that these omissions misled investors and analysts seeking to understand the impact of crypto mining on Nvidia’s business.
The lawsuit was dismissed in 2021, but a San Francisco-based Ninth U.S. Circuit Court of Appeals revived it in a 2-1 ruling. The plaintiffs’ allegations that Huang knowingly or recklessly made false or misleading statements were deemed sufficient by the Ninth Circuit, allowing their case to proceed.
The justices will hear Nvidia’s contention that the complaint lacks enough specificity to proceed.
Nvidia urged the justices to take up its appeal, arguing that the Ninth Circuit’s ruling would open the door to “abusive and speculative litigation.”
In 2022, Nvidia agreed to settle charges with U.S. authorities by paying $5.5 million. The charges alleged that the company did not adequately disclose the effects of crypto mining on its gaming business.
Nvidia’s (NVDA) stock price reached a new all-time high earlier Monday, surpassing Apple’s total market value again and ranking second in the global market.
