US Supreme Court tosses case involving securities fraud suit against Nvidia

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Just In: Supreme Court allows investors’ class action to proceed against microchip company Nvidia


WASHINGTON (AP) — The Supreme Court is allowing a class-action lawsuit that accuses Nvidia of misleading investors about its past dependence on selling computer chips for mining volatile cryptocurrency.


On Wednesday, The US Supreme Court circumvented a decision on whether to allow shareholders to proceed with a securities fraud lawsuit accusing artificial intelligence chipmaker Nvidia of misleading investors about how much of its sales depended on the volatile cryptocurrency market.

Nvidia had argued that the investors’ lawsuit should be thrown out because it does not measure up to a 1995 law, the Private Securities Litigation Reform Act, intended to bar frivolous complaints. A district court judge had dismissed the complaint before the federal appeals court in San Francisco ruled that it could go forward. The Biden administration backed the investors at the Supreme Court.

“This is a win for corporate accountability. When corporations mislead shareholders, they undermine trust in our markets. Ensuring that investors can seek justice is essential to preserving fairness and transparency,” Deepak Gupta, who represented the investors at the Supreme Court, said in a statement.

The justices, who heard arguments in the case on Nov. 13, dismissed Nvidia's appeal of a lower court's ruling that allowed a 2018 class action - litigation led by the Stockholm, Sweden-based investment management firm E. Ohman J:or Fonder AB - to move forward. 

In 2022, Nvidia, which is based in Santa Clara, California, paid a $5.5 million fine to settle charges by the Securities and Exchange Commission that it failed to disclose that crypto-mining was a significant source of revenue growth from the sale of graphics processing units that were produced and marketed for gaming. The company did not admit to any wrongdoing as part of the settlement.

Nvidia’s recent performance has been spectacular. Even after the news of the China investigation, its share price is up 180% this year.

Nvidia has led the artificial intelligence sector to become one of the stock market’s biggest companies, as tech giants continue to spend heavily on the company’s chips and data centers needed to train and operate their AI systems.

The lawsuit is one of two high court cases that involved class-action lawsuits against tech companies. The justices also dismissed an appeal from Facebook parent Meta that sought to end a multibillion-dollar class action investors’ lawsuit stemming from the privacy scandal involving the Cambridge Analytica political consulting firm. Its action leaves the lower court's decision in place. The Supreme Court's dismissal came in a one-line order without any explanation.
At issue was whether the plaintiffs cleared the heightened legal bar for bringing private securities fraud suits set under a 1995 federal law called the Private Securities Litigation Reform Act aimed to screen out frivolous litigation. 
The plaintiffs accused Nvidia and its CEO Jensen Huang of violating a 1934 federal law called the Securities Exchange Act by making statements in 2017 and 2018 that falsely downplayed how much of Nvidia's revenue growth came from crypto-related purchases.
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