The Supreme Court has permitted a class-action lawsuit against Nvidia to move forward, accusing the company of misleading investors regarding its historical reliance on sales of computer chips for volatile cryptocurrency mining.
The ruling was issued Wednesday, coinciding with reports that Chinese authorities are investigating the tech giant for potential anti-monopoly law violations. Just four weeks prior, Nvidia had sought to dismiss the lawsuit, but the justices concluded they had erred in taking up the case initially. Their decision upheld a previous appellate ruling that allowed the lawsuit to continue.
This lawsuit originated in 2018, led by a Swedish investment management firm, after a downturn in cryptocurrency profitability caused Nvidia’s revenue to fall below expectations. Consequently, the company experienced a significant 28% decrease in its stock price.
Nvidia contended that the investors’ lawsuit should be dismissed, arguing that it did not align with the criteria set out in the 1995 Private Securities Litigation Reform Act, intended to prevent baseless claims. Initially, a district court ruled against the lawsuit, but a federal appeals court in San Francisco decided that it was valid and could proceed. The Biden administration supported the investors in their appeal to the Supreme Court.
Deepak Gupta, the representative for the investors, noted that the ruling signifies progress for corporate accountability, emphasizing that misleading shareholders erodes trust in the marketplace and that it is essential for investors to be able to seek justice to ensure market fairness and transparency.
In 2022, Nvidia, headquartered in Santa Clara, California, settled with the Securities and Exchange Commission, paying $5.5 million for failing to disclose that cryptomining was a substantial part of its revenue growth from graphics processing units marketed for gaming. Notably, Nvidia did not admit to any wrongdoing in this settlement.
Despite the ongoing investigation by China, Nvidia has experienced remarkable success recently, with its share price soaring 180% this year. The company has emerged as a leader in the artificial intelligence sector, becoming one of the largest entities in the stock market, as technology companies continue to invest heavily in its chips and data centers critical for training and operating their AI systems.
This class-action lawsuit is one of two significant cases involving technology firms that reached the Supreme Court. The justices also dismissed an appeal from Meta, the parent company of Facebook, which aimed to terminate a multibillion-dollar class-action lawsuit from investors related to the privacy controversy linked to the Cambridge Analytica consulting firm.
