The Race to Sue Nvidia: TechCrunch Examines the Investor Case Ahead

A shareholder case takes shape

Schall, Brown & Schwartz said Monday it was investigating whether Nvidia made misleading statements or withheld information relevant to investors. Stanford Law professor Robert Bartlett expects other firms to follow and said a complaint might be filed by the end of the day.

Under federal securities law, the first complaint starts a 60-day period for investors to seek appointment as lead plaintiff. An early-filing firm can gain time to recruit investors with substantial losses and influence how the case is framed. Nvidia is based in Santa Clara, making the Northern District of California a likely venue.

The statements under scrutiny

Last month, after The New York Times reported on Huang’s ties to Alice Huang, an Nvidia spokesperson described the relationship to The Hill as “not unusual or unexpected.” The spokesperson said Megaspeed was like other regional cloud customers and that meetings with customers were part of the CEO’s job. Huang has since acknowledged to the board that the relationship was intimate. The Times also reported that U.S. intelligence had monitored Alice Huang for more than a year. Bartlett called Nvidia’s earlier statement “clearly a misleading statement” and said the CEO’s knowledge is attributed to the company.

Potential costs and governance questions

Bartlett described a likely “fraud on the market” claim, in which investors argue they bought shares based on false or incomplete public information and suffered losses when the truth emerged. Nvidia’s Monday share decline could help establish damages, which are linked to the stock’s fall.

Such cases often take years before settling, Bartlett said. A settlement would typically be paid by the company and its directors-and-officers insurers, without personal consequences for the CEO or board. Shareholders ultimately bear the cost, directly or through insurance premiums.

What the investigation could reveal

Bartlett identified board oversight as a separate area of possible exposure. Directors may have been unaware of the relationship, but the board has oversight duties, and reporting about the Megaspeed connection should have reached directors if it posed a critical risk.