The Supreme Court is likely to allow a class-action lawsuit against Nvidia to proceed, which accuses the company of misleading investors regarding its reliance on sales of computer chips used in cryptocurrency mining. On Wednesday, the justices reviewed the tech giant’s appeal against a previous court decision that permitted a 2018 lawsuit, initiated by a Swedish investment management firm, to continue.
This case is one of two significant class-action suits against technology firms currently before the high court. Just last week, the justices discussed whether to dismiss a multibillion-dollar class-action suit involving Meta, the parent company of Facebook, related to the privacy violations associated with the Cambridge Analytica scandal.
During the recent proceedings, it appeared that a majority of the Supreme Court justices, spanning both liberal and conservative ideologies, were skeptical of the arguments presented by Nvidia’s attorney, Neal Katyal. Justice Elena Kagan openly questioned the rationale for accepting the case, expressing doubts about why Nvidia should prevail.
This legal challenge arose following a downturn in cryptocurrency profitability, which resulted in Nvidia’s reported revenue falling below expectations and a significant 28% decline in its stock value. Adding to the company’s troubles, Nvidia settled with the Securities and Exchange Commission in 2022 for $5.5 million over allegations that it did not fully disclose the role of cryptomining in contributing to its revenue growth from graphics processing units designed for gaming. Nvidia, however, did not admit to any wrongdoing in this settlement.
Despite these challenges, Nvidia has emerged as a leader in the artificial intelligence sector, which is now among the largest in the stock market as technology firms continue to invest heavily in the company’s chips and data centers crucial for training and deploying AI systems. Nvidia’s dominance in chip manufacturing has made it a key player in what CEO Jensen Huang refers to as “the next industrial revolution.” The rise in demand for generative AI applications, which can create documents, generate images, and function as virtual assistants, has significantly bolstered Nvidia’s chip sales over the past year.
Currently, Nvidia ranks as one of the most valuable organizations in the S&P 500, with a market valuation exceeding $3 trillion. The company is scheduled to announce its third-quarter earnings results next week.
In the ongoing Supreme Court case, Nvidia is contending that the investors’ lawsuit should be dismissed as it allegedly fails to meet the criteria established by the Private Securities Litigation Reform Act of 1995, aimed at preventing baseless claims. A district court initially dismissed the case, but the federal appeals court in San Francisco subsequently ruled that the suit could proceed. Notably, the Biden administration has expressed support for the investors in this matter.
A verdict from the Supreme Court is anticipated by early summer.
