Nvidia Hit With Securities Lawsuit Over Bad Graphics Chips

By Sumner Lemon, Sep 10, 2008

A lawsuit filed in a California court on Tuesday alleged Nvidia violated U.S. securities laws and concealed the existence of a serious defect in its graphics-chip line for at least eight months "in a series of false and misleading statements made to the investing public." The lawsuit charged that Nvidia CEO Jen-Hsun Huang and CFO Marvin Burkett knew as early as November 2007 about a flaw that exists in the packaging used with some of the company's graphics chips that caused them to fail at unusually high rates. Nvidia did not immediately reply to an e-mail request for comment on the lawsuit. Nvidia publicly acknowledged the flaw on July 2, when it announced plans to take a one-time charge of up to US$200 million to cover warranty costs related to the problem. That announcement caused Nvidia's stock price to fall by 31 percent to $12.98 and reduced the company's market capitalization by $3 billion, the lawsuit said.

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