WASHINGTON (AP) — The Supreme Court on Wednesday seemed likely to keep alive a class-action lawsuit accusing Nvidia (NVDA) of misleading investors about its reliance on selling computer chips to mine volatile cryptocurrencies.
The judges heard arguments in the technology company’s appeal against a lower court ruling that allowed a 2018 lawsuit led by a Swedish investment management company to proceed.
It is one of two high court cases involving class-action lawsuits against technology companies. Last week, the justices debated whether to close a multibillion-dollar class-action lawsuit by investors against Facebook parent Meta stemming from the privacy scandal involving the political consulting firm Cambridge Analytica.
On Wednesday, a majority of the court that included liberal and conservative justices appeared to reject arguments presented by Neal Katyal, a lawyer for Nvidia, based in Santa Clara, California.
“It is becoming less and less clear why we took this case and why we should win it,” Justice Elena Kagan said.
The lawsuit came after a drop in cryptocurrency profitability, which caused Nvidia’s revenue to miss projections and led to a 28% drop in the company’s stock price.
In 2022, Nvidia paid a $5.5 million fine to settle Securities and Exchange Commission charges of failing to disclose that crypto mining was a major source of revenue growth from the sale of graphics processing units produced and marketed for games. The company did not admit to any wrongdoing as part of the agreement.
Nvidia has led the artificial intelligence sector to become one of the largest companies on the stock market, as tech giants continue to spend heavily on the company’s chips and data centers needed to train and operate their intelligence systems. artificial.
That dominance in chipmaking has cemented Nvidia’s place as a poster child for the rise of artificial intelligence, 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 among the most valuable companies in the S&P 500, worth more than $3 trillion. The company will present its third quarter results next week.
In the Supreme Court case, the company argues that the investors’ lawsuit should be dismissed because it falls short of a 1995 law, the Private Securities Litigation Reform Act, that seeks to prohibit frivolous complaints.
A district court judge dismissed the complaint before the federal appeals court in San Francisco ruled it could move forward. The Biden administration is supporting investors.