Setback for Nvidia after Supreme Court rules class-action lawsuit against AI chip giant for misleading investors can proceed
The US Supreme Court has made a decision about a class action lawsuit against Nvidia from disgruntled investors.
The Associated Press reported that the Supreme Court is allowing a class-action lawsuit that accuses Nvidia of misleading investors about its past dependence on selling computer chips for the mining of volatile cryptocurrency to proceed.
Last month Silicon UK reported that the US Supreme Court began to hear two separate cases by Nvidia and Meta Platforms that both seek to derail class-action investor lawsuits, with the decisions potentially affecting investors’ ability to hold companies accountable for alleged corporate misconduct.
Appeal dismissed
The investor lawsuit alleged Nvidia chief executive Jensen Huang made false statements concealing the company’s reliance on the volatile market through sales to crypto miners.
The lawsuit led by a Swedish investment management firm alleges that investors lost out when Nvidia’s stock price dropped after investors became aware that many of the company’s GPU accelerator customers were crypto miners.
In its Supreme Court filing, Nvidia had argued the plaintiffs had not met the requirements of the Private Securities Litigation Reform Act of 1995, which seeks to weed out nuisance securities lawsuits.
It said the decision could “open the floodgates” to new securities fraud lawsuits, threatening to “take the nation back to the pre-PSLRA era when ‘nuisance filings’ were ‘rampant’”.
In 2022 Nvidia paid $5.5m to the SEC to settle charges it did not properly disclose the impact of crypto mining on its sales. The company did not admit to any wrongdoing as part of the settlement.
Now according to the Associated Press, the Supreme Court justices had heard Nvidia’s arguments in its bid to shut down the lawsuit, but decided that they were wrong to take up the case in the first place.
They dismissed Nvidia’s appeal, leaving in place an appellate ruling allowing the case to go forward, AP reported.
“This is a win for corporate accountability. When corporations mislead shareholders, they undermine trust in our markets. Ensuring that investors can seek justice is essential to preserving fairness and transparency,” Deepak Gupta, who represented the investors at Supreme Court, was quoted by AP as saying in a statement.
The justices also dismissed an appeal from Facebook parent Meta that sought to end to a multibillion-dollar class action investors’ lawsuit stemming from the privacy scandal involving the Cambridge Analytica political consulting firm.
Other lawsuits
This is not the only lawsuit Nvidia is facing.
In November 2023 Nvidia was hit with a lawsuit filed in California, after one of its engineers, Mohammad Moniruzzaman, accidentally shared data with his former employer whilst on a video conference call.
Automotive tech company Valeo alleged that Moniruzzaman accidentally revealed the source code he had allegedly stolen from his former employer, namely Valeo, whilst he was on a Microsoft Teams call with that same company.
Then in March 2024, Nvidia was hit with a class action lawsuit from three authors who allege the company illegally used their works and those of others to train its NeMo Megatron AI model