Supreme Court allows investors’ class action to proceed against microchip company Nvidia
WASHINGTON — The Supreme Court allows a class action lawsuit filing allegations Nvidia of misleading investors about his past reliance on computer chip sales to continue mining volatile cryptocurrency.
The court’s ruling comes Wednesday, the same week China said it did to research the microchip company for suspected violations of China’s anti-monopoly laws. The justices heard arguments in Nvidia’s attempt to dismiss the lawsuit four weeks ago, then decided they were wrong to hear the case at all. They rejected the company’s appeal and left an appellate ruling, allowing the case to move forward.
It involved a 2018 lawsuit led by a Swedish asset manager. It followed a dip in cryptocurrency profitability, which caused Nvidia’s revenues to fall short of expectations and led to a 28% drop in the company’s share price.
Nvidia had argued that the investors’ lawsuit should be dismissed because it does not comply with a 1995 law, the Private Securities Litigation Reform Act, designed to bar frivolous complaints. A district court judge had dismissed the complaint before the federal appeals court in San Francisco ruled it could move forward. The Biden administration backed the investors in the Supreme Court.
In 2022, Nvidia, based in Santa Clara, California, paid a $5.5 million fine to settle the charges. Securities and Exchange Commission that it failed to disclose that crypto mining was a major source of revenue growth from sales of graphics processing units produced and marketed for gaming. The company has not admitted any wrongdoing as part of the settlement.
Nvidia’s recent performance has been spectacular. Even after news of the Chinese investigation, the stock price is up 180% this year.
Nvidia has made the artificial intelligence sector one of the biggest businesses in the stock market as tech giants continue to spend heavily on the company’s chips and data centers needed to train and operate their AI systems.
The lawsuit is one of two cases before the Supreme Court involving class action lawsuits against technology companies. The judges also rejected an appeal from a Facebook parent Meta which sought to end a multibillion-dollar class action lawsuit stemming from the privacy scandal surrounding the Cambridge Analytica political consultancy firm.