NVIDIA has objected to a shareholder class action lawsuit filed against it for allegedly not accurately disclosing sales of chips used for cryptocurrency mining. The U.S. Supreme Court will make the final decision on the appropriateness of the lawsuit.
According to Bloomberg on the 17th (local time), the Supreme Court announced that it will hear NVIDIA's appeal in October. NVIDIA had filed the appeal in response to the federal appeals court allowing the class action lawsuit.
The NVIDIA shareholders who filed the lawsuit pointed out that Jensen Huang, NVIDIA's CEO in 2017-2018, concealed the fact that NVIDIA's record sales growth was driven by increased GPU sales used for cryptocurrency mining rather than gaming. They claim that the failure to properly disclose this caused investors to suffer losses. The shareholders argue that due to the volatility of the cryptocurrency market, the company was exposed to more risk than it had disclosed. In fact, NVIDIA's stock price plunged 28% over two days in November 2018 after failing to meet its revenue forecast.
The federal district court, which handled the first trial, dismissed the lawsuit in 2021. However, the Ninth Circuit U.S. Court of Appeals accepted the plaintiffs' claims and allowed the class action. NVIDIA then requested the Supreme Court to review the appeals court's ruling, arguing that it opens the door to abusive speculative lawsuits. The Supreme Court plans to review the legality of the class action lawsuit in October.
NVIDIA's 2018 disclosure issues related to cryptocurrency mining performance were also investigated by the U.S. Securities and Exchange Commission (SEC). GPUs are chips developed to efficiently process 2D and 3D graphics and can handle many computations simultaneously. Because of these characteristics, they are widely used in cryptocurrency mining and recent generative artificial intelligence (AI) technologies.
Earlier, the SEC pointed out that despite a significant increase in NVIDIA's gaming segment revenue, which includes the GPU business, due to cryptocurrency mining demand in the second and third quarters of 2018, NVIDIA did not properly inform investors of this.
NVIDIA neither admitted nor denied these allegations and agreed to pay $5.5 million (approximately 7.99 billion KRW) to the SEC.
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