The U.S. Supreme Court agreed on Monday to hear Nvidia’s (NASDAQ:NVDA) attempt to dismiss a securities fraud lawsuit. The lawsuit accuses the artificial intelligence chipmaker of misleading investors about the extent of its sales tied to the volatile cryptocurrency industry.
Nvidia’s appeal follows a lower court’s decision to revive a proposed class action brought by shareholders in California against the company and its CEO, Jensen Huang. The lawsuit, led by the Stockholm-based investment management firm E. Ohman J
Fonder AB, seeks unspecified monetary damages.
Santa Clara, California-based Nvidia is a major player in the AI industry, and its market value has surged significantly.
In 2018, Nvidia’s chips gained popularity for cryptomining, a process that involves solving complex mathematical equations to secure cryptocurrencies like bitcoin.
The plaintiffs, in their 2018 lawsuit, accused Nvidia and top company officials of violating the Securities Exchange Act of 1934. They claim that statements made in 2017 and 2018 falsely downplayed the impact of crypto-related purchases on Nvidia’s revenue growth.
These omissions, according to the plaintiffs, misled investors and analysts who sought to understand the influence of cryptomining on Nvidia’s business.
U.S. District Judge Haywood Gilliam Jr. dismissed the lawsuit in 2021, but the San Francisco-based 9th U.S. Circuit Court of Appeals, in a 2-1 ruling, subsequently revived it. The 9th Circuit found that the plaintiffs had sufficiently alleged that Huang made “false or misleading statements knowingly or recklessly,” allowing the case to proceed.
Nvidia urged the justices to hear its appeal, arguing that the 9th Circuit’s ruling could lead to “abusive and speculative litigation.”
In 2022, Nvidia agreed to pay $5.5 million to U.S. authorities to settle charges that it did not properly disclose the impact of cryptomining on its gaming business.
On June 10, the justices agreed to hear a similar case involving Meta’s Facebook. The social media platform seeks to dismiss a securities fraud lawsuit accusing it of misleading investors in 2017 and 2018 about the misuse of user data. Facebook appealed after a lower court allowed a shareholder lawsuit led by Amalgamated Bank to proceed.
The Supreme Court will hear the Nvidia and Facebook cases in its next term, beginning in October.
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