NVIDIA Corp. beat a securities fraud class action after the U.S. Court of Appeals for the Ninth Circuit ruled that the plaintiffs did not adequately plead that the company acted, at a minimum, with deliberate recklessness to mislead investors about defects in its semiconductor chips.
U.S. District Judge Beverly Reid O’Connell of Los Angeles, sitting by designation, said it could have been inferred that NVIDIA acted with “scienter” to delay disclosure of the defects until it could prepare replacement chips. But “a more compelling inference is that NVIDIA did not disclose because it was investigating the extent of the problem, whether it was responsible for it and, if so, whether it would exhaust the reserve” set aside to cover inevitable product defects.
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