US Supreme Court Allows Nvidia Securities Fraud Lawsuit to Proceed
The United States Supreme Court has dismissed Nvidia's appeal regarding a securities fraud lawsuit, allowing the case Nvidia v. E. Öhman J:or Fonder AB to proceed in federal court.
The decision is a setback for Nvidia, which sought to overturn a Ninth US Circuit Court of Appeals ruling that allowed the case to move forward. The appellate court had reinstated allegations that Nvidia's leadership, including CEO Jensen Huang, misrepresented the reasons behind the company’s revenue growth in 2017 and 2018.
Allegations Against Nvidia
The lawsuit, initiated by Swedish investment firm E. Öhman J:or Fonder AB, claims Nvidia misled shareholders about its dependence on crypto-related revenue during the 2017 and 2018 crypto boom. Plaintiffs assert that Nvidia downplayed the impact of crypto mining sales on its GeForce GPUs, attributing revenue growth primarily to gaming demand.
As the crypto market declined in late 2018, Nvidia reportedly missed revenue projections, leading to a stock drop of over 28% within two days. Shareholders claim the company's failure to disclose risks from crypto market volatility resulted in significant financial losses.
Following a hearing in November, the Supreme Court dismissed Nvidia’s appeal without explanation, upholding the Ninth Circuit's decision. Nvidia argued the lawsuit did not meet the criteria set by the 1995 Private Securities Litigation Reform Act and maintained its statements were not false or misleading.
“We would have preferred a decision on the merits affirming the trial court’s dismissal of the case, but we are fully prepared to continue our defense,” Nvidia stated after the Supreme Court's decision.
Second Securities Case Dismissed This Quarter
During oral arguments, some justices expressed reluctance to intervene, indicating the case was a factual dispute more suitable for lower courts rather than a broad legal issue for Supreme Court review.
The dismissal is viewed as a win for shareholder rights and corporate accountability. A ruling in Nvidia's favor could have set a precedent making it easier for companies to secure early dismissals of similar lawsuits.
This marks the second securities fraud case dismissed by the Supreme Court this quarter; last month, the court rejected Meta Platforms' appeal concerning data-harvesting allegations related to Cambridge Analytica.
The stakes remain high for Nvidia, which settled related claims with the Securities and Exchange Commission (SEC) for $5.5 million in 2020. The current shareholder lawsuit may result in further financial and reputational consequences.