The U.S. Supreme Court has rejected Nvidia’s appeal to dismiss a class-action lawsuit that accused the company of misleading investors about its reliance on cryptocurrency mining for GPU sales.
The ruling, issued in a single-line order without explanation on December 11, reinstates the case, which was previously dismissed by a California district court in 2021.
Litigation Origin and Allegations
The case stems from a lawsuit filed by a Swedish investment firm after a plunge in cryptocurrency profitability in 2018 sent Nvidia’s stock price tumbling 28%. The plaintiffs allege that Nvidia misrepresented the extent to which cryptocurrency mining drives its revenue, claiming that the company positioned its GPUs as gaming-centric while a large portion of sales were tied to the volatile cryptocurrency mining market.
Investors claim these misrepresentations drove up Nvidia’s stock price, which subsequently fell below expectations when the cryptocurrency market cooled. The lawsuit alleges that Nvidia deliberately concealed its reliance on cryptocurrency sales to protect its valuation.
Legal Challenges and Supreme Court Decisions
Nvidia sought to have the case dismissed under the Private Securities Litigation Reform Act of 1995, which was designed to stop baseless securities claims. The company argued that the plaintiffs failed to identify specific misrepresentations or provide sufficient evidence to prove that company officials intentionally misled investors.
While the district court initially dismissed the case in March 2021, the Ninth Circuit Court of Appeals later reinstated it. The Biden administration sided with the plaintiffs, adding weight to the case. On December 11, the Supreme Court rejected Nvidia’s appeal as “unwisely granted,” effectively upholding the appeals court’s decision.
Nvidia’s response
An Nvidia spokesperson expressed disappointment with the Supreme Court’s decision, saying:
“We had hoped to rule on the merits and affirm 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 critical to protecting shareholders and ensuring a strong economy, and we remain Committed to supporting them.”
Regulatory Issues in the United States and China
The Supreme Court’s ruling comes amid growing scrutiny of Nvidia’s business practices. In 2022, Nvidia settled with the U.S. Securities and Exchange Commission (SEC) and was fined $5.5 million over similar charges of failing to disclose its reliance on cryptocurrency mining revenue.
To add insult to injury, Chinese regulators recently launched an antitrust investigation into Nvidia’s dominance of the artificial intelligence chip market. Despite these challenges, Nvidia’s stock price has soared 180% this year on rising demand for AI-related technology.
Disclaimer: This article is for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.
