The U.S. Supreme Court has ended Nvidia’s attempt to dodge a securities fraud lawsuit, a move that leaves the chipmaker defending itself against allegations of misleading investors about its ties to the volatile cryptocurrency market. The justices dismissed Nvidia’s appeal in a brief, one-line order that left standing a lower court’s decision to allow the 2018 class action to proceed.
At the heart of the case are claims by shareholders that Nvidia, led by CEO Jensen Huang, downplayed the extent to which its sales depended on the surging but unstable cryptomining industry. Beginning in 2017, the company’s chips were widely adopted for mining cryptocurrencies like Bitcoin and Ethereum. But as crypto profitability waned in 2018, Nvidia’s revenues missed projections, triggering a sharp drop in its stock price.
The suit, spearheaded by a Swedish investment management firm, alleges that Nvidia made false statements in 2017 and 2018 to misrepresent its financial health. It seeks financial compensation for investors who suffered losses.
Nvidia had previously argued that the lawsuit lacked the legal weight required under federal securities laws. However, the San Francisco-based Ninth Circuit Court of Appeals reinstated the case, finding that the plaintiffs presented credible allegations of knowing or reckless misstatements by the company’s leadership.
This legal clash comes against the backdrop of Nvidia’s 2022 agreement to pay $5.5 million to federal regulators over similar disclosure issues. Although that settlement did not include an admission of wrongdoing, it has amplified scrutiny of Nvidia’s communication with investors during the crypto boom.
The dismissal by the Supreme Court does not resolve the case but keeps the spotlight on Nvidia as it heads toward further legal battles. The decision also signals the high court’s reluctance to wade into technical disputes where the existing legal framework suffices for lower courts to make determinations.
As the case moves forward, Nvidia maintains its commitment to defending its actions, emphasizing the importance of clear standards in securities litigation to protect the broader economy. For investors and industry observers, the outcome of this lawsuit could set important precedents for corporate accountability in the tech sector.
