The U.S. Supreme Court has paved the way for a class-action lawsuit alleging Nvidia misled investors about its dependence on cryptocurrency mining.
Supreme Court Dismisses Nvidia’s Appeal
On Wednesday, the Supreme Court announced its decision to allow the lawsuit against Nvidia to move forward. The case accuses the chipmaker of misrepresenting its reliance on revenue from cryptocurrency mining.
In an unsigned brief, the court dismissed Nvidia’s appeal as “improvidently granted,” effectively stating it was unnecessary to hear the case. Notably, no justices dissented from the ruling.
This outcome upholds a previous appeals court decision that permitted most of the lawsuit to proceed.
The Origins of the Lawsuit
The lawsuit dates back to 2018, following a decline in cryptocurrency profitability that negatively impacted Nvidia’s earnings. A Swedish investment firm filed the complaint, claiming the company downplayed its dependency on crypto-related income.
The plaintiffs argue that Nvidia’s alleged misstatements caused its stock to be overvalued, leading to a 28% drop in its share price when the truth emerged.
Nvidia, however, maintained that the lawsuit should be dismissed under the Private Securities Litigation Reform Act of 1995, which aims to prevent frivolous securities lawsuits. The company asserted that the plaintiffs failed to identify specific false statements or provide evidence that company officials knowingly misled investors.
While a district court initially dismissed the case, a federal appeals court reinstated it. The Biden administration’s support for the plaintiffs further highlighted the lawsuit’s significance.
Legal Implications and the Path Ahead
By dismissing the appeal, the Supreme Court avoided creating a precedent on how the 1995 law should be applied. This leaves the appeals court’s interpretation as the governing standard for now, allowing the case against Nvidia to proceed.
China’s Antitrust Probe Adds Pressure
Adding to Nvidia’s legal troubles, China has launched an antitrust investigation into the company. The probe examines potential violations of Chinese antimonopoly laws, creating additional roadblocks for Nvidia amid its rapid expansion.
This investigation echoes similar cases in the tech industry. For instance, the Supreme Court recently dismissed an appeal by Meta, Facebook’s parent company, allowing a multibillion-dollar class-action lawsuit over privacy breaches related to Cambridge Analytica to proceed.
Nvidia’s Position in the Tech Industry
Despite these legal challenges, Nvidia continues to dominate the tech sector. In 2022, the company settled with the Securities and Exchange Commission (SEC) by paying a $5.5 million fine for failing to disclose that crypto mining significantly drove revenue for its gaming graphics cards. As part of the settlement, Nvidia did not admit to any wrongdoing.
This year, Nvidia’s stock has soared by 180%, primarily due to its leadership in artificial intelligence (AI). The company’s chips are essential for training and operating AI systems, cementing its role as a critical player in the tech landscape.
Broader Trends in Tech Litigation
The Nvidia case forms part of a broader trend of class-action lawsuits targeting major tech companies. These cases continue to highlight the growing scrutiny and regulatory challenges faced by leading firms in the industry
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