BY COMFORT OGBONNA
The U.S. Supreme Court on Wednesday dismissed an appeal by artificial intelligence chipmaker Nvidia in a securities fraud lawsuit filed by shareholders. The lawsuit accused Nvidia of misleading investors about how much of its revenue depended on the volatile cryptocurrency market.
The justices, who heard arguments in the case on November 13, decided not to rule on the legal issues at hand and instead rejected Nvidia’s appeal of a lower court’s decision that allowed the 2018 class-action lawsuit to proceed. The lawsuit is led by E. Ohman J:or Fonder AB, an investment management firm based in Stockholm, Sweden.
The Supreme Court’s dismissal, issued in a one-line order without explanation, effectively upheld the lower court’s decision. During the hearing, some justices expressed doubts about intervening in the case, questioning whether there was a clear legal issue for them to address or if the case was merely a factual dispute. They also noted the technical complexities of the case as a potential reason for deferring to lower courts.
The case focused on whether the plaintiffs met the heightened legal standards for bringing private securities fraud claims under the 1995 Private Securities Litigation Reform Act, which aims to prevent frivolous lawsuits. The plaintiffs alleged that Nvidia and its CEO, Jensen Huang, violated the 1934 Securities Exchange Act by downplaying the extent to which Nvidia’s revenue growth relied on cryptocurrency-related purchases in 2017 and 2018.
As cryptocurrency prices surged in 2017, Nvidia’s chips became popular for cryptomining, a process involving complex calculations to secure cryptocurrencies like Bitcoin and Ether. By late 2018, as crypto profitability declined, Nvidia’s revenue fell short of expectations, causing its stock price to drop in early November of that year.
The lawsuit seeks unspecified monetary damages, partially to recover the lost value of Nvidia stock held by investors. In 2022, Nvidia agreed to pay $5.5 million to settle federal charges for failing to disclose cryptomining’s impact on its gaming business, though it did not admit wrongdoing.
A federal judge initially dismissed the shareholder lawsuit, but the 9th U.S. Circuit Court of Appeals later revived it, ruling that the plaintiffs had sufficiently alleged that Huang made knowingly or recklessly false or misleading statements.
Deepak Gupta, the attorney representing shareholders, called the Supreme Court’s dismissal “a win for corporate accountability.” He criticized efforts by corporations and their allies to limit class actions, saying, “We hope the court will think twice the next time a corporation uses the same playbook.”
An Nvidia spokesperson said the company is “fully prepared to continue our defense,” emphasizing the importance of “consistent and predictable standards in securities litigation” for protecting shareholders and maintaining economic stability.
Nvidia had argued that the plaintiffs failed to prove that the disputed statements were false or that the company intentionally or recklessly misled investors. However, the plaintiffs countered that their allegations—supported by testimony from former employees, market analysis, and expert opinions—were strong enough to allow the case to proceed to the discovery phase.
The Biden administration supported the shareholders in the case. This Nvidia dispute was one of two securities fraud cases heard by the Supreme Court in November. The other case, involving Meta’s Facebook, was argued on November 6 and similarly dismissed on November 22.
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