The U.S. Supreme Court has declined Nvidia’s appeal to dismiss a class-action lawsuit alleging the company misled investors about its reliance on cryptocurrency mining for GPU sales.
The decision, delivered in a one-line order without explanation on December 11, reinstates the case after it was previously dismissed by a California district court in 2021.
Lawsuit Origins and Allegations
The case stems from a 2018 lawsuit filed by a Swedish investment firm following a steep decline in Nvidia’s stock value, which dropped 28% as cryptocurrency profitability plummeted. Plaintiffs claim Nvidia misrepresented the extent to which cryptocurrency mining drove its revenue, asserting the company marketed its GPUs as gaming-focused while a substantial portion of sales was linked to the volatile crypto-mining market.
Investors allege these misrepresentations inflated Nvidia’s stock price, which subsequently fell short of expectations when the crypto market cooled. The lawsuit argues that Nvidia knowingly obscured its dependence on cryptocurrency sales to protect its valuation.
Legal Challenges and Supreme Court Decision
Nvidia sought to have the case dismissed under the Private Securities Litigation Reform Act of 1995, which aims to deter baseless securities claims. The company argued the plaintiffs failed to identify specific false statements or provide sufficient evidence that company officials knowingly misled investors.
While a district court initially dismissed the case in March 2021, the Ninth Circuit Court of Appeals later reinstated it. The Biden administration supported the plaintiffs, adding weight to the case. On December 11, the Supreme Court dismissed Nvidia’s appeal as “improvidently granted,” effectively upholding the appellate court’s decision.
Nvidia’s Response
An Nvidia spokesperson expressed disappointment in the Supreme Court’s decision, stating:
“We would have preferred a decision on the merits affirming the trial court’s dismissal of the case, but we are fully prepared to continue our defense. Consistent and predictable standards in securities litigation are essential to protecting shareholders and ensuring a strong economy, and we remain committed to supporting them.”
Regulatory Concerns in the U.S. and China
The Supreme Court’s decision coincides with increasing scrutiny of Nvidia’s business practices. In 2022, Nvidia settled with the U.S. Securities and Exchange Commission (SEC), paying a $5.5 million fine over similar allegations of failing to disclose its reliance on cryptocurrency mining for revenue.
Adding to its legal troubles, Chinese regulators recently launched an antitrust investigation into Nvidia, targeting its dominant position in the artificial intelligence chip market. Despite these challenges, Nvidia’s stock has surged 180% this year due to increasing demand for AI-related technologies.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
