ATI Technologies has been hit with a class-action lawsuit over allegations that last year it misled investors over the strength of its business, in order to inflate share prices.

The company, which manufactures graphics-accelerator cards for many Apple computers, is facing charges under sections of the US Securities Exchange Act.

An ATI spokeswoman said: "We're surprised by the lawsuit. We will defend it vigorously."

New York legal firm Milberg Weiss Bershad Hynes and Lerach filed the suit against ATI and three company officials in particular. These include ATI's CEO, Kwok Yuen Ho.

The allegations claim the company made statements that were "materially false and misleading", because they failed to disclose the "impact of competition on their business", claims press reports in Canada.

The charges stem from May last year, when ATI's stock price halved overnight when the company announced a decline in its gross margins and the writing off of $56 million in inventory.

A copy of the complaint is available from the Bernard M Gross law offices. ATI closed at $7.29 at the end of yesterday's trading.