The U.S. Supreme Court rejected NVIDIA's appeal! Jensen Huang said the wrong thing 6 years ago, and NVIDIA faced a securities fraud lawsuit

According to the Zhitong Finance APP, the U.S. Supreme Court on Wednesday rejected the appeal of AI chip giant NVIDIA (NVDA.US), which sought to avoid a securities fraud lawsuit filed by shareholders. The shareholders accused the company of misleading investors by incorrectly stating how much its sales depended on the volatile cryptocurrency market.

It is understood that the justices of the U.S. Supreme Court heard arguments regarding the case on November 13 and chose not to make a formal decision on the potential legal dispute, instead rejecting NVIDIA's appeal against a lower court's ruling that allowed the 2018 class action lawsuit to proceed. The lawsuit is led by the investment management company E.Ohman J: or Fonder AB based in Stockholm, Sweden.

In ruling that the appeal should not be granted, the U.S. Supreme Court upheld the lower court's decision. The Supreme Court's dismissal is a one-line order and does not provide any explanation.

During the arguments, some justices expressed reservations about intervening in the case. They questioned whether there were clear legal issues that needed their decision, rather than just disputes over certain facts, and indicated that given the technical complexity of the case, they were not suited to ultimately resolve it.

The focus of the debate was whether the plaintiffs cleared the higher legal threshold for filing a private securities fraud lawsuit as stipulated by the 1995 Private Securities Litigation Reform Act, which aims to weed out frivolous lawsuits.

The plaintiffs accused NVIDIA and its CEO Jensen Huang of making false forecasts and statements in 2017 and 2018, misleadingly describing how much of NVIDIA's revenue growth came from cryptocurrency-related hardware purchases, in violation of the federal Securities Exchange Act of 1934.

Starting in 2017, as the prices of certain cryptocurrencies began to rise, NVIDIA's high-performance GPUs became increasingly popular among global cryptocurrency institutions for "cryptocurrency mining," a process involving the execution of numerous extremely complex mathematical encryption algorithms to secure cryptocurrencies like Bitcoin and Ethereum.

By the end of 2018, amid a significant decline in cryptocurrency-related profitability, NVIDIA's revenue began to fall short of expectations, leading to a sharp drop in its stock price starting in early November of that year.

The lawsuit seeks unspecified monetary damages, partly to compensate for the long-term value loss of NVIDIA shares held by investors at the time.

It is reported that NVIDIA agreed in 2022 to pay $5.5 million to U.S. authorities to settle allegations that it did not properly disclose the specific impact of its cryptocurrency mining business and related GPU demand on its gaming business, but did not admit or deny the findings of the U.S. federal regulators' investigation.

A federal judge had previously dismissed the shareholders' lawsuit, but the U.S. Ninth Circuit Court of Appeals based in San Francisco subsequently reinstated the lawsuit. The Ninth Circuit found that the plaintiffs adequately alleged that CEO Jensen Huang and the entire NVIDIA management made "false or misleading statements, made knowingly or recklessly," allowing their case to proceed.

Deepak Gupta, representing the shareholder group at the U.S. Supreme Court, stated that the dismissal of the lawsuit is "a victory for corporate accountability." Gupta stated, "With the support of the U.S. Chamber of Commerce and its allied partners, the Supreme Court Bar Association representing the companies often tries to address seemingly non-existent legal issues and exploit rules to fabricate non-existent legal problems to reduce class action lawsuits." "We hope the court will think twice the next time a company uses the same script."

An NVIDIA spokesperson stated that the company "is fully prepared and continues to defend itself."

The company's spokesperson said in a statement, "Consistent and predictable standards in securities litigation are crucial for protecting shareholders and ensuring a strong economy, and we remain committed to supporting them."

NVIDIA had argued before the Supreme Court that the plaintiffs failed to adequately prove that the disputed company statements were false or that the company intentionally or recklessly misled investors, as required by U.S. federal law.

The plaintiffs countered that their lawsuit contained sufficiently strong allegations—gathering actual evidence from former NVIDIA employees, market analysis, and expert opinions, ultimately surviving NVIDIA's motion to dismiss and entering the discovery phase of the litigation.

It is understood that the current U.S. government led by President Joe Biden supports the shareholders in this case.

This long-standing dispute involving NVIDIA is one of two cases being heard by the Supreme Court in November, concerning the rights of private litigants to hold publicly traded companies accountable for alleged securities fraud. The other case, involving Meta (Meta.US) and Facebook, was argued on November 6 and similarly dismissed by the judge on November 22