Nvidia’s Supreme Court Chips: A Guide
Shareholders of Nvidia are getting their moment in court after claims that the chipmaker made false or misleading statements about its involvement in the cryptocurrency market. On December 11th, the US Supreme Court rejected Nvidia’s appeal to dismiss a securities fraud lawsuit brought by E Öhman J: or Fonder, a Swedish investment firm. The lawsuit, filed in 2018, alleges that Nvidia downplayed the impact of cryptocurrency sales on its revenue growth, leading to losses for investors when the company’s stock price dropped in late 2018.
The legal battle began when Judge Haywood Gilliam dismissed the claim in 2021, only to have it reinstated by the Ninth US Circuit Court of Appeals in a 2-1 decision. The Court of Appeals found that Nvidia’s CEO had knowingly or recklessly made false statements in 2017 and 2018 concerning the company’s dependence on cryptocurrency-related sales. This was seen as a violation of the Securities Exchange Act of 1934, prompting the shareholders to seek financial damages.
Nvidia’s ties to the crypto market became more pronounced during the cryptocurrency boom of 2017, as the demand for its chips for mining purposes increased. However, when the profitability of mining declined in 2018, Nvidia’s revenues fell short of expectations, causing a decline in its stock price. Despite Nvidia’s arguments that the claims lacked evidence, the shareholders maintained that they were supported by insider information, market research, and expert analysis.
In the aftermath of the Supreme Court’s decision to reject Nvidia’s petition, legal representatives for the shareholders hailed it as a victory for corporate accountability. Nvidia, on the other hand, remains committed to defending itself, emphasizing the importance of consistent standards in securities litigation. The company had previously settled with the Securities and Exchange Commission in 2022 for failing to disclose the impact of crypto-mining on its business, agreeing to pay a fine of $5.5 million.
Represented by legal teams from Cooley, Nvidia and CEO Jensen Huang faced off against the shareholders in court, with both parties gearing up for a protracted legal battle. Despite the ongoing legal wrangling, the outcome of the case will have far-reaching implications for both sides, highlighting the complexities of securities litigation in today’s fast-paced market environment.
