The US Supreme Court has chosen not to intervene in a securities fraud lawsuit against Nvidia, the world’s second-largest chipmaker.
The court dismissed an appeal by Nvidia, allowing a 2018 class action lawsuit to proceed. The case, led by Swedish investment management firm E. Ohman J:or Fonder AB, accuses Nvidia of misleading investors about how much its sales were tied to the volatile cryptocurrency market.
The dispute centers on whether Nvidia and its CEO Jensen Huang misled investors in 2017 and 2018 by downplaying the significant role of cryptocurrency-related sales in driving the company’s revenue growth. During this period, Nvidia’s chips became increasingly popular among cryptocurrency miners who used them to perform complex calculations necessary to secure cryptocurrencies like Bitcoin and Ether. However, as cryptocurrency profitability began to decline in 2018, Nvidia’s revenue fell short of projections, causing a drop in its stock price.
The plaintiffs allege that Nvidia concealed the extent of its dependence on cryptomining, which contributed to the stock value loss. They are seeking unspecified damages to compensate for the lost value of their investments. In 2022, Nvidia paid $5.5 million to settle charges from the US Securities and Exchange Commission (SEC) over similar claims but did not admit to or deny the SEC’s findings.
The case was initially dismissed by a federal judge but was later revived by the 9th US Circuit Court of Appeals, which determined that the plaintiffs had presented enough evidence to proceed with their case. Nvidia, however, appealed the decision to the Supreme Court, arguing that the plaintiffs had failed to meet the legal standards necessary to show that the company’s statements were knowingly false or misleading.
In a brief one-line order, the Supreme Court dismissed the appeal without providing an explanation. This decision allows the case to continue in lower courts. The Biden administration had expressed support for the shareholders, who argue that they should be allowed to pursue their claims under the Securities Exchange Act of 1934.
This dismissal follows a similar decision made by the Supreme Court in November, where the justices chose not to hear a securities fraud case against Meta (formerly Facebook). Both cases involve allegations that the companies misled investors about significant events that affected their stock prices.
While Nvidia has denied wrongdoing in both the shareholder lawsuit and the SEC settlement, the ongoing litigation may have broader implications for the tech industry. As the legal process continues, the focus remains on whether Nvidia’s public statements about its business and cryptocurrency exposure were intentionally misleading, and if so, how much accountability the company should bear for the financial losses incurred by investors.
Reuters and the Washington Post contributed to this report.
