The U.S. Supreme Court agreed on Monday to hear a bid by Nvidia (NASDAQ:NVDA) to scuttle a securities fraud lawsuit accusing the artificial intelligence chipmaker of misleading investors about how much of its sales went to the volatile cryptocurrency industry.
The justices took up Nvidia’s appeal made after a lower court revived a proposed class action brought by shareholders in California against the company and its CEO Jensen Huang. The suit, led by the Stockholm, Sweden-based investment management firm E. Ohman J:or Fonder AB, seeks unspecified monetary damages.
Santa Clara, California-based Nvidia is a high-flying company that has become one of the biggest beneficiaries of the AI boom, and its market value has surged.
In 2018, Nvidia’s chips became popular for cryptomining, a process that involves performing complex math equations in order to secure cryptocurrencies like bitcoin.
The plaintiffs in a 2018 lawsuit accused Nvidia and top company officials of violating a U.S. law called the Securities Exchange Act of 1934 by making statements in 2017 and 2018 that falsely downplayed how much of Nvidia’s revenue growth came from crypto-related purchases.
Those omissions misled investors and analysts who were interested in understanding the impact of cryptomining on Nvidia’s business, the plaintiffs said.
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 adequately alleged that Huang made “false or misleading statements and did so knowingly or recklessly,” allowing their case to proceed.
Nvidia urged the justices to take up its appeal, arguing that the 9th Circuit’s ruling would open the door to “abusive and speculative litigation.”
Nvidia in 2022 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.
The justices agreed on June 10 to hear a similar bid by Meta’s Facebook (NASDAQ:META) to dismiss a private securities fraud lawsuit accusing the social media platform of misleading investors in 2017 and 2018 about the misuse of its user data by the company and third parties. Facebook appealed after a lower court allowed a shareholder lawsuit led by Amalgamated Bank (NASDAQ:AMAL) to proceed.
The Supreme Court will hear the Nvidia and Facebook cases in its next term, which begins in October.
