Nvidia in defective-chip class-action suit

The company kept graphic-chip flaws secret for six months while making 'misleading statements', claim shareholders
Written by Tom Espiner, Contributor

Chip company Nvidia has been taken to court by some of its shareholders and others in a class action over faulty graphics chips with an abnormally high failure rate.

Class-action cases allow anyone who feels they have been affected by the case to join in, and share in any subsequent recompense.

In this case, Nvidia is accused of making misleading statements about its GPU chips between November 2007 and July 2008. As a result of denying the problems, the plaintiffs say, the company underestimated expenses and overestimated revenues on its balance sheet.

This led to "a material negative impact on the company's financial condition, financial statements and future business prospects," according to Kantrowitz, Goldhamer & Graifman, PC, the law firm that filed the suit on behalf of the plaintiffs. The suit was filed in the US District Court for the Northern District of California on Wednesday.

In July Nvidia filed a report with the US Securities and Exchange Commission, which stated that the company would incur $150m (£80m) to $200m reduction in revenue through the cost of the return, repair and replacement of faulty components.

Nvidia blamed weak die and packaging material for its problems with its MCP and GPU products used in notebook systems. As an emergency measure, Nvidia developed a software driver that would turn fans on to "reduce the thermal pressure" on the chips, and urged customers to "change the thermal management of the MCP and GPU products in their notebook system designs".

Nvidia is currently fighting another suit in the Californian courts. In July, interface company Rambus filed a patent-infringement suit against Nvidia.

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