The Supreme Court has made a significant decision regarding a class-action lawsuit against Nvidia, a leading microchip company. The lawsuit accuses Nvidia of misleading investors about its historical reliance on selling computer chips for cryptocurrency mining. The court's ruling, issued this week, allows the lawsuit to move forward.
China has also announced an investigation into Nvidia for potential violations of anti-monopoly laws. This development adds to the legal challenges facing the company.
The lawsuit was initiated in 2018 by a Swedish investment management firm following a decline in cryptocurrency profitability. This downturn led to Nvidia's revenues falling short of expectations and a subsequent 28% drop in the company's stock price.
Nvidia had sought to have the lawsuit dismissed, arguing that it did not meet the standards set by the Private Securities Litigation Reform Act of 1995. However, the appellate court in San Francisco ruled in favor of allowing the case to proceed.
In a separate incident in 2022, Nvidia paid a $5.5 million fine to settle charges by the Securities and Exchange Commission related to its failure to disclose the significance of cryptomining as a revenue source from the sale of graphics processing units marketed for gaming.
Despite these legal challenges, Nvidia's recent performance has been remarkable, with its share price soaring by 180% this year. The company has played a pivotal role in the artificial intelligence sector, attracting significant investments from tech giants for its chips and data centers essential for AI systems.
This lawsuit is one of two recent high-profile cases involving class-action lawsuits against tech companies. The Supreme Court also dismissed an appeal from Meta, the parent company of Facebook, in a multibillion-dollar investors' lawsuit linked to the Cambridge Analytica privacy scandal.
