The Supreme Court has decided to allow a class-action lawsuit to proceed, accusing Nvidia of misleading investors about its reliance on selling computer chips for cryptocurrency mining, which is a volatile market.
This decision comes just as China announced an investigation into Nvidia over potential violations of its anti-monopoly laws. Four weeks ago, the court heard Nvidia’s request to block the lawsuit, but they ultimately decided they were wrong to take up the case, dismissing Nvidia’s appeal and allowing the case to move forward as ruled by a lower court.
The lawsuit dates back to 2018, led by a Swedish investment firm, following a decline in cryptocurrency profitability. This caused Nvidia’s revenue to fall short of projections, and its stock price dropped by 28%. Nvidia had argued that the lawsuit should be dismissed under the Private Securities Litigation Reform Act of 1995, which aims to prevent baseless claims. A district court initially dismissed the case, but the San Francisco appeals court allowed it to continue, with the Biden administration supporting the investors at the Supreme Court.
In 2022, Nvidia paid a $5.5 million fine to settle charges by the Securities and Exchange Commission (SEC) for failing to disclose that cryptomining had been a significant driver of revenue from its graphics processing units (GPUs), which were marketed for gaming. Nvidia did not admit wrongdoing as part of the settlement.
Despite the ongoing legal issues, Nvidia’s stock has performed exceptionally well, rising 180% this year, even with the news of the Chinese investigation. Nvidia has become a leader in the artificial intelligence sector, driving significant demand for its chips and data centers used by tech companies for AI systems.
This lawsuit is one of two major cases involving class-action lawsuits against tech companies. The Supreme Court also dismissed an appeal from Meta, the parent company of Facebook, attempting to end a multibillion-dollar lawsuit related to the privacy scandal involving the Cambridge Analytica political consulting firm.