AI Sentiment: Bearish
Reason: Nvidia's appeal was dismissed by the US Supreme Court in a lawsuit over misrepresentation of the sale of its GPUs for crypto mining, which could lead to financial penalties.
The Supreme Court of the United States recently dismissed an appeal from chipmaker Nvidia, upholding a lower court's ruling in a class action lawsuit over the company's representations about its graphics processing units (GPUs) used for cryptocurrency mining.
The suit, brought by Nvidia's shareholders, claimed that the company deliberately underreported the sale of its GPUs for crypto mining purposes, misleading investors. The shareholders alleged that the firm disproportionately attributed the revenue from these sales to its gaming division, causing an artificial inflation in the share price. When the truth about the source of the revenue came to light, the share price plummeted, resulting in significant losses for shareholders.
Initially, Nvidia had successfully persuaded a district court to dismiss the lawsuit on the grounds that the shareholders failed to establish that Nvidia's actions were deliberately deceptive or materially false. However, a federal appeals court reversed this decision in September 2020, ruling that the shareholders had indeed presented a "cogent and compelling" inference of deceit on Nvidia's part.
Following the appeals court's decision, Nvidia sought to take the matter to the Supreme Court, arguing that the lower court had set an unreasonably high standard for establishing corporate deceit. However, the Supreme Court declined to hear the appeal, effectively upholding the appeals court's decision.
The lawsuit will now proceed in the district court. If found guilty, Nvidia could face substantial financial penalties. The case serves as a reminder to companies in the tech and crypto sectors about the importance of transparency and honesty in their dealings with investors.