Nvidia deeply embroiled in an 8-year "mining misguidance" lawsuit, facing a critical moment in class action proceedings.

Nvidia deeply embroiled in an 8-year "mining misguidance" lawsuit, facing a critical moment in class action proceedings.

Nvidia is facing an ongoing securities fraud class action lawsuit that has lasted almost eight years, despite investors who bought the stock at the time having since gained over 3,400% in returns. As the case moves into critical procedural stages, the outcome will have a profound impact on U.S. securities class action rules. Last month, U.S. Federal Judge Haywood Gilliam Jr. ruled to certify the plaintiffs as a class, a decision seen as a decisive moment in securities fraud litigation. Nvidia immediately appealed to the Ninth Circuit Court, seeking to overturn this certification before lower court proceedings conclude. Meanwhile, Judge Gilliam has asked both parties to submit trial duration estimates, as the case nears formal trial stage. The core dispute in this case is whether Nvidia and its CEO Jensen Huang deliberately downplayed the company's reliance on cryptocurrency mining revenue between 2017 and 2018, thereby misleading investors. In November 2018, Nvidia disclosed that third-quarter revenue fell short of expectations, and its stock price plunged 28.5% within two trading days, sparking the lawsuit.

Origins of the lawsuit: Crypto winter triggers stock crash

This lawsuit was initiated in December 2018, led by E. Ohman J:or Fonder AB, an asset management company headquartered in Stockholm, Sweden. Plaintiffs allege that since 2017, as cryptocurrency prices rose, demand for Nvidia chips soared because they were heavily used for crypto mining. However, the company’s management deliberately downplayed this dependence in communications with investors. Jensen Huang publicly stated that "crypto is small for us" and "our core business is elsewhere." In November 2018, the cryptocurrency market cooled rapidly, and Nvidia announced that third-quarter revenue was about 2% below expectations due to a "sharp drop in crypto demand," resulting in a 28.5% stock crash in two trading days. Plaintiffs contend that management’s earlier statements masked the true impact of crypto business on the company’s revenue, constituting securities fraud.

Twists and turns: Class certification becomes pivotal

The lawsuit has undergone numerous reversals. In 2021, Judge Gilliam dismissed the case, but the Ninth Circuit Court overturned the decision, finding that plaintiffs had sufficiently alleged that Nvidia and Jensen Huang "made false or misleading statements, knowingly or recklessly." The U.S. Supreme Court agreed to hear the case in 2024, but after oral arguments, declined, citing "improper grant of certiorari," and sent the case back to Judge Gilliam. On March 25, Judge Gilliam issued a 50-page ruling certifying the class. He found contradictions between Nvidia’s November disclosure and prior management statements about the crypto business, with analysts' reactions confirming this—several analysts later said the November disclosure contradicted the company’s previous assurances downplaying crypto exposure.

In its appeal, Nvidia advanced two core legal claims, supported by major institutions including the U.S. Chamber of Commerce, Securities Industry and Financial Markets Association (SIFA), and National Association of Manufacturers. First, Nvidia cited the U.S. Supreme Court’s 2021 precedent in Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System, arguing that management's earlier general statements about the crypto business fundamentally "mismatched" with the specific revenue disclosure in November. Thus, the earlier statements do not constitute a "correction" of the latter and should not be considered false statements affecting the stock price. Second, Nvidia invoked the Supreme Court's 2013 Comcast Corp. v. Behrend decision, arguing that Judge Gilliam made a legal error by not requiring plaintiffs to submit a detailed damages calculation model when certifying the class. Sullivan & Cromwell Co-Chair Robert Giuffra Jr., representing seven former SEC officials and law professors, submitted an amicus brief stating the case involves "the two most contested issues in securities class certification."

Judgment’s impact may extend beyond Nvidia

The outcome of these two legal disputes will broadly affect the U.S. securities class action landscape. On the damages model issue, similar disputes are simultaneously emerging across various jurisdictions. The Fourth Circuit is hearing a securities fraud case against Boeing on the same issue; the Sixth Circuit last year partially decertified a class action against FirstEnergy, an Ohio utility company, due to flaws in the plaintiffs' damages model. Plaintiffs' lawyers from Kessler Topaz Meltzer and Bernstein Litowitz Berger and Grossmann argue in court filings that this case meets all requirements for class certification and is consistent with other recent securities class actions approved in the Northern California federal district court. Currently, Nvidia has yet to respond to the Ninth Circuit’s review outcome; its external legal team is from Milbank and Cooley. At a pretrial conference on April 21, Nvidia’s lawyers revealed almost nothing about whether the company would accept a jury trial if class certification stands. Judge Gilliam stated he needs to schedule the trial and asked both sides for their best estimate on trial length.Risk Warning and DisclaimerThe market carries risks, and investment should be approached cautiously. This article does not constitute personal investment advice and does not take into account the unique investment objectives, financial circumstances, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their circumstances. Investing based on this article is at your own risk.