On December 11, 2024, the U.S. Supreme Court dismissed Defendants’ appeal in a securities fraud action against NVIDIA and its CEO Jensen Huang. Defendants petitioned the Court to review an August 2023 decision by the U.S. Court of Appeals for the Ninth Circuit reversing the dismissal of plaintiffs’ complaint.
Led by Öhman Fonder (n/k/a Lannebo Kapitalförvaltning AB), one of Sweden’s largest and oldest institutional investors, and Stichting Pensioenfonds PGB, a Dutch pension fund, the action alleges that Defendants fraudulently concealed the extent of NVIDIA’s reliance on sales of graphic processing units (GPUs) to cryptocurrency miners between August 2017 and November 2018. Plaintiffs allege that NVIDIA’s true dependence on crypto-related GPU sales was revealed in late 2018 when the price of cryptocurrencies collapsed, leading to a decline in NVIDIA’s GPU sales and a precipitous drop in NVIDIA’s stock price.
After the District Court dismissed the complaint, the Ninth Circuit reversed, finding Plaintiffs had sufficiently alleged that Huang and NVIDIA “made materially false or misleading statements about the company’s exposure to crypto,” and that considered holistically, Plaintiffs’ complaint adequately alleged that Defendants made these statements with scienter, or fraudulent intent.
On appeal to the Supreme Court, Defendants and their supporting amici argued that the Ninth Circuit wrongly allowed Plaintiffs to proceed without alleging with particularity the contents of internal reports proving that Defendant Huang’s statements were knowingly or recklessly false, and had improperly permitted Plaintiffs to rely on expert analysis of NVIDIA’s undisclosed crypto-related sales. At oral argument on November 13, 2024, several Justices questioned requiring such specific evidence at the pleading stage, without the benefit of discovery, and precluding the use of experts to bolster factual allegations. Ultimately, the Supreme Court dismissed the writ of certiorari as improvidently granted.
This outcome is a significant victory for investors and corporate accountability. By rejecting NVIDIA’s proposed bright-line rules, the Supreme Court ensured that lower courts will continue to evaluate securities fraud complaints holistically and that investors can continue to seek justice when corporations mislead their investors.