Investors who bought Nvidia stock in 2017 and maintained their positions have seen extraordinary gains since then. Yet that market success has not halted a long-running securities fraud class action tied to the company’s 2017-2018 public statements about its exposure to cryptocurrency-related sales.
The suit, filed in December 2018 by a group of shareholders led by Stockholm-based investment manager E. Ohman J:or Fonder AB, alleges that Nvidia and its chief executive Jensen Huang downplayed the importance of crypto revenue in statements to investors. Plaintiffs say those comments masked the underlying significance of cryptomining demand to Nvidia’s business in 2017 and early 2018, a reliance that became evident when crypto prices and associated demand later fell.
After a series of procedural turns, the case stands at a potentially decisive juncture. U.S. District Judge Haywood Gilliam Jr. issued a 50-page order on March 25 certifying a class of investors, and Nvidia has asked the 9th U.S. Circuit Court of Appeals in San Francisco to step in before the matter proceeds through the district court.
In its request to the appellate court, Nvidia asks the 9th Circuit to overturn Gilliam’s class-certification ruling and to provide guidance on two central legal questions that the company says are mired in uncertainty in the circuit. First, Nvidia contends the district court misapplied U.S. Supreme Court precedent in assessing whether the company’s alleged misstatements actually affected the price of its stock - a concept courts refer to as price impact. Second, Nvidia argues the judge erred by certifying the class without requiring plaintiffs to present a detailed, class-wide damages model at the certification stage.
The company’s outside counsel from Milbank and Cooley have framed those two issues as questions of “enduring confusion” that warrant interlocutory intervention by the appeals court. Nvidia did not respond to a request for comment.
The appeal has drawn amicus support from an array of prominent organizations and individuals in the securities defense arena. Friends of the court briefs have been filed by the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the National Association of Manufacturers. Sullivan & Cromwell co-chair Robert Giuffra Jr. filed an amicus brief on behalf of seven former SEC officials and law professors that backs Nvidia’s request for guidance.
Plaintiffs’ counsel, including teams from Kessler Topaz Meltzer and Bernstein Litowitz Berger and Grossmann, assert that the case satisfies the legal prerequisites for class certification and that the facts align with other securities suits recently certified in the Northern District of California. Those firms did not respond to requests for comment.
The litigation’s procedural history is layered. Gilliam originally dismissed the case in 2021, but the 9th Circuit revived the suit, concluding the plaintiffs had adequately alleged that Nvidia and Huang made false or misleading statements knowingly or recklessly. The U.S. Supreme Court agreed in 2024 to hear the matter but ultimately dismissed the case as improvidently granted after oral argument, sending it back to the district court for further proceedings.
Judge Gilliam’s March 25 certification order examined in detail what Nvidia’s executives told investors in 2017 and 2018 about the company’s cryptocurrency business. Plaintiffs rely on statements such as Huang’s assertions that “Crypto is small for us” and “Our core business is elsewhere” to support the claim that investors were led to underappreciate crypto’s contribution to Nvidia’s revenue.
The factual narrative that underpins the complaint centers on demand for Nvidia chips tied to cryptomining. Beginning in 2017, certain cryptocurrencies rose in price and Nvidia’s GPUs became popular for mining activities, which involves solving complex computational problems to secure digital currencies. When crypto prices later collapsed, demand for those chips fell sharply. Nvidia reported in November 2018 that it missed its third-quarter revenue target by 2% as a result of a “sharp crypto falloff,” and the company’s stock fell 28.5% over two trading sessions.
Establishing securities fraud requires proof that investors relied on misstatements and, crucially, that those misstatements had a measurable impact on the stock’s price. The debate in this case turns on whether Nvidia’s earlier, high-level comments about crypto could have inflated its share price such that the later 2018 disclosures corrected a misleading impression, or whether the later statements were not corrective in nature.
Nvidia points to the U.S. Supreme Court’s 2021 decision in Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System to argue that there was a fatal mismatch between the broad assurances downplaying crypto exposure and the later, more concrete disclosures about third-quarter revenue. The company contends this mismatch undermines any claim that earlier statements had price impact.
Judge Gilliam was not persuaded that the front-end comments had zero impact. Noting analyst reactions that found the November 2018 disclosures inconsistent with Nvidia’s earlier assurances, Gilliam concluded there remained a plausible link between the earlier statements and the later price movement.
On the damages issue, Gilliam rejected Nvidia’s challenge to the plaintiffs’ proposed methodology. The judge found plaintiffs’ expert offered an acceptable “out-of-pocket” damages approach for calculating class-wide losses at the certification stage, even if specific calculations would be refined later. Nvidia says that holding conflicts with the Supreme Court’s 2013 Comcast Corp. v. Behrend decision and recent rulings in other circuits that have required more rigorous class-wide damages modeling before certification.
Parallel disputes over price impact and damages modeling are active in other appeals courts as well, according to filings. The 4th U.S. Circuit Court of Appeals is considering a similar question in a case involving Boeing, and the 6th Circuit last year decertified a class action against Ohio utility FirstEnergy in part because of flaws identified in plaintiffs’ damages modeling. Either legal issue could provide the 9th Circuit with a basis to take up Nvidia’s appeal and potentially reverse the certification order.
At an April 21 status conference before Judge Gilliam, Nvidia’s lawyers provided limited indication of whether the company would pursue a jury trial if the class is ultimately certified. Gilliam directed both sides to submit their best estimates of how long a trial might take, observing that the parties’ statements that it was premature to estimate duration were not a sufficient basis for scheduling. “Both parties are saying it’s premature to estimate the length of the trial, but it isn’t,” Gilliam said. “I have to block it out on my calendar.”
Contextual note - The litigation continues to evolve in the district court while the company seeks interlocutory relief from the 9th Circuit. The dispute encapsulates two frequently litigated class-certification issues in securities cases: whether alleged misstatements had price impact and whether plaintiffs must present a detailed, class-wide damages model at certification.