Shareholder sues Nvidia over GPU failure cover-up

— 12:40 PM on September 10, 2008

Just over two months after Nvidia went public with notebook GPU failures and subsequently lowered its revenue forecast, an angry shareholder has filed a class-action lawsuit in a California court. The suit alleges that Nvidia knew about the failures last summer but kept things under lid for eight months.

The plaintiff's law firm conveniently hosts a PDF copy of the complaint, giving us a glimpse into the allegations. Here's the meaty part:

At least as early as November 2007, Nvidia and the other Defendants have known about these unprecedented failure rates, as well as their "root causes." Indeed, Michael Hara, the Company's Vice President for Investor Relations and Communications, conceded during a September 4, 2008, "Citigroup Technology Conference" that Nvidia began troubleshooting these problems with major computer manufacturers beginning in August of 2007. . . . Despite this, for eight months or more Nvidia and the other Defendants concealed the defects and their ramifications for the Company's financial health and future in a series of false and misleading statements made to the investing public.

Nasty. One can hardly blame shareholders for being ticked off, though. Nvidia's stock nose-dived from around $18 to $12.50 on the news, and it still hasn't recovered: the shares are worth $10.98 right now. This isn't the first time we've heard about the possibility of a cover-up, either. In late July, an HP spokesman mentioned that HP had "initiated a customer program" to tackle the GPU failures back in November 2007.

Add to that the lawsuit's claim that Nvidia is also lying about the scope of the problem, and you have an explosive cocktail. If the failures don't make Nvidia go over its expected $200-million write-off limit, the lawsuit might

We've asked Nvidia to comment and are awaiting a reply. We'll post an update as soon as we get it.

Update: Nvidia Partner PR Manager Ken Brown has replied to our request with a terse, "I'm sorry but we can't comment on pending litigation."

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