WASHINGTON (AP) — The Supreme Court appeared likely Wednesday to uphold a class-action lawsuit accusing Nvidia (NVDA) of misleading investors about its reliance on sales of computer chips to mine volatile cryptocurrency.
The justices heard arguments in the tech company’s appeal against a lower court ruling that allowed a 2018 lawsuit led by a Swedish investment management firm to proceed.
It is one of two high court cases involving class action lawsuits against technology companies. Last week, the justices wrestled with whether to halt a multibillion-dollar class action lawsuit against Facebook parent Meta, which stemmed from the privacy scandal involving political consulting firm Cambridge Analytica.
On Wednesday, a majority of the court, which also included liberal and conservative justices, appeared to reject arguments by Neal Katyal, the lawyer for Santa Clara, California-based Nvidia.
“It is increasingly unclear why we brought this case and why you should win,” Justice Elena Kagan said.
The lawsuit followed a dip in cryptocurrency profitability, which caused Nvidia’s revenues to fall short of expectations and led to a 28% drop in the company’s stock price.
In 2022, Nvidia paid a $5.5 million fine to settle charges brought by the Securities and Exchange Commission for failing to disclose that crypto mining was a major source of revenue growth from sales of graphics processing units it manufactured and marketed for gaming. The company has not admitted any wrongdoing as part of the settlement.
Nvidia has made the artificial intelligence sector one of the biggest businesses in the stock market as tech giants continue to spend heavily on the company’s chips and data centers needed to train and operate their AI systems.
That dominance in chip manufacturing has cemented Nvidia’s position as the figurehead of the artificial intelligence boom — what CEO Jensen Huang has called “the next industrial revolution.” Demand for generative AI products that can compose documents, create images and serve as personal assistants has boosted sales of Nvidia’s specialized chips over the past year.
Nvidia is one of the most valuable companies in the S&P 500, valued at over $3 trillion. The company will report third-quarter results next week.
In the Supreme Court case, the company argues that the investors’ lawsuit should be dismissed because it does not comply with a 1995 law, the Private Securities Litigation Reform Act, designed to prevent frivolous complaints.
A district court judge had dismissed the complaint before the federal appeals court in San Francisco ruled it could move forward. The Biden administration is backing the investors.
