Nvidia and Meta, two giants of Silicon Valley, are sweating it out in the Supreme Court over securities fraud cases that could open the floodgates to more investor lawsuits. Both companies are hoping the justices will block investors from coming after them with what they call “frivolous” securities fraud suits. But from the looks of the grilling Nvidia’s lawyer, Neal Katyal, got from the Supreme Court, things aren’t shaping up too favorably for Big Tech.
At issue is a case in which Nvidia’s CEO, Jensen Huang, allegedly made statements that, according to investors, were misleading. Investors claim that back in 2017 and 2018, Huang misled the public about the demand for Nvidia’s chips, suggesting it was driven by the gaming sector when, in reality, it was fueled by the risky and volatile cryptocurrency mining boom. Of course, once that crypto bubble burst, Nvidia’s stock price took a dive, and the lawsuits started flying. Nvidia’s argument? Investors should need more than just a hunch from an analyst to take a case to court. They’re asking the Supreme Court to raise the bar on what plaintiffs need to prove from the outset, hoping to make it harder for these kinds of lawsuits to waste their time.
Supreme Court Justices from both sides of the aisle, though, don’t seem completely sold on Nvidia’s plea. Justice Elena Kagan openly questioned Katyal’s reasoning, remarking, “It just seems to me that you’re asking us to engage in a kind of analysis that we are not very good at.” Even Justice Samuel Alito pointed out how tough it would be for a court to dive into such complex technical details right at the beginning of a case. Alito remarked, “This is a highly technical subject, and I just don’t understand how a court is supposed to be evaluating that at the pleading stage.”
Meta isn’t faring much better. They’re defending against claims that they misled investors by hiding the extent of their partnership with Cambridge Analytica, which notoriously mishandled data from 87 million Facebook users. Justices Clarence Thomas and Sonia Sotomayor, typically on opposite sides, both appeared sympathetic to the investors, with Thomas questioning the level of transparency these tech companies actually provide.
Nvidia and Meta are clinging to the Private Securities Litigation Reform Act (PSLRA), a law designed to make it tougher for investors to file lawsuits based on hindsight, but the Supreme Court doesn’t seem too convinced. Justice Neil Gorsuch, Trump’s appointee, suggested that it’s a stretch to believe Nvidia’s CEO wasn’t aware of the real source of revenue for the company.
This isn’t just about Nvidia and Meta; it’s about whether tech CEOs and their companies can get away with vague “risk disclosures” and spin, leaving investors holding the bag when the truth finally comes out. And that’s precisely why these two tech behemoths are fighting so hard to keep the gates closed on these lawsuits. If they lose, expect to see a lot more accountability headed for corporate boardrooms.
While the Biden DOJ has lined up with the investors on this one, calling for more accountability from Big Tech, Trump’s straightforward approach to business transparency and keeping markets honest has clearly left its mark. Trump was all about cutting red tape, but not at the expense of American citizens or investors who just want companies to be honest. If this is the kind of case that makes companies think twice before misleading their investors, then maybe Big Tech will finally get the reality check they’ve been avoiding.
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