Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are available free of charge on or through our Internet website, http://www.nvidia.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Our website and the information contained therein as connected thereto is not intended to be incorporated into the Annual Report on Form ~~10-K.~~10-K/A.

As discussed in the Explanatory Note we concluded that we need to amend our Original Filing to restate our consolidated financial statements for the years ended January 29, 2006, January 30, 2005, and January 25, 2004 and the related disclosures. This Form 10-K/A also includes the restatement of selected consolidated financial data as of and for the years ended January 29, 2006, January 30, 2005, January 25, 2004, January 26, 2003, and January 27, 2002, and the unaudited quarterly financial data for each of the quarters in the years ended January 29, 2006 and January 30, 2005. We also concluded that we need to amend the Quarterly Report on Form 10-Q for the quarter ended April 30, 2006, originally filed on May 31, 2006, to restate our condensed consolidated financial statements for the quarters ended April 30, 2006 and May 1, 2005 and the related disclosures. We will also restate the July 31, 2005 financial statements included in the Quarterly Report on Form 10-Q for the quarter ended July 30, 2006. We will restate the October 30, 2005 financial statements with the filing of our October 29, 2006 Form 10-Q. However, we have included in Exhibit 99.1 a restated balance sheet as of October 31, 2005, restated statements of income for the three and nine month periods ended October 31, 2005, and a restated statement of cash flows for the nine month period ended October 31, 2005. We have not amended and we do not intend to amend any of our other previously filed annual reports on Form 10-K or quarterly reports on Form 10-Q for the periods affected by the restatement or adjustments other than the amended Quarterly Report on Form 10-Q/A for the quarter ended April 30, 2006 and this Form 10-K/A for the year ended January 30, 2006.

ITEM 1A. RISK FACTORS

In evaluating NVIDIA and our business, the following factors should be considered in addition to the other information in this Annual Report on Form 10-K/A. Any one of the following risks could seriously harm our business, financial condition and results of operations, which could cause our stock price to decline. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Risks Related to Our Operations

The matters relating to the Audit Committee of the Board of Directors’ review of our historical stock option granting practices and the restatement of our consolidated financial statements may result in future litigation, which could harm our financial results.

On August 10, 2006, NVIDIA announced that the Audit Committee of the Board of Directors, with the assistance of outside legal counsel, was conducting a review of our stock option practices covering the time from NVIDIA’s initial public offering in 1999 (our fiscal year 2000) through June 2006. As described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2 to our Consolidated Financial Statements, the Audit Committee has reached the conclusion that incorrect measurement dates were used for financial accounting purposes for stock option grants made in certain prior periods. As a result, NVIDIA has recorded additional non-cash stock-based compensation expense, and related tax effects, related to stock option grants.

The Audit Committee’s review of NVIDIA’s stock option practices identified a number of occasions on which the measurement date used for financial accounting and reporting purposes for stock options granted to some of our employees was different from the actual grant date. To correct these accounting errors, we are amending our Annual Report on Form 10-K for the year ended January 30, 2006 and our Quarterly Report on Form 10-Q for the three months ended April 30, 2006, to restate the consolidated financial statements contained in those reports.

The Audit Committee’s independent review of our historical stock option granting practices has required us to incur substantial expenses for legal, accounting, tax and other professional services, has diverted our management’s attention from our business, and could in the future harm our business, financial condition, results of operations and cash flows.

Our historical stock option granting practices and the restatement of our prior financial statements have exposed us to greater risks associated with litigation and regulatory proceedings. As described in Part II, Item 3, “Legal Proceedings”, several derivative complaints have been filed against our directors and certain of our executive officers pertaining to allegations relating to stock option grants. We cannot assure you that these or future similar complaints, or any future litigation or regulatory action will result in the same conclusions reached by the Audit Committee. The conduct and resolution of these matters or other litigation will be time consuming, expensive and may distract management from the conduct of our business.

We voluntarily contacted the SEC regarding the Audit Committee’s review and, as of the date of the filing of this Annual Report on Form 10-K/A, the SEC is continuing the inquiry of our historical stock option grant practices it began in late August 2006. In October 2006, we met with the SEC and provided it with a review of the status of the Audit Committee’s review and in November 2006 we voluntarily provided the SEC with further documents. We plan to continue to cooperate with the SEC in its inquiry.

While we believe that we have made appropriate judgments in concluding the correct measurement dates for option grants, the SEC may disagree with the manner in which we have accounted for and reported, or not reported, the financial impact of past option grant measurement date errors, and there is a risk that its inquiry could lead to circumstances in which we may have to further restate our prior financial statements, amend prior filings with the SEC, or otherwise take other actions not currently contemplated. Any such circumstance could also lead to future delays in filing our subsequent SEC reports and delisting of our common stock from the NASDAQ Global Select Market. Furthermore, if we are subject to adverse findings in any of these matters, we could be required to pay damages or penalties or have other remedies imposed upon us which could harm our business, financial condition, results of operations and cash flows. Please see Note 2, “Restatement of Consolidated Financial Statements, Audit Committee and Company Findings” of the Notes to Consolidated Financial Statements for further information.

Because our gross margin for any period depends on a number of factors, our failure to forecast any change in such factors could adversely affect our gross margin.

We continue to pursue measures in an effort to improve our gross margin. Our gross margin for any period depends on a number of factors, including the mix of our products sold, average selling prices, introduction of new products, sales discounts, unexpected pricing actions by our competitors, the cost of product components, and the yield of wafers produced by the foundries that manufacture our products. If we incorrectly forecast the impact of the aforementioned factors on our business, we may be unable to take action in time to counteract any negative impact on our gross margin. In addition, if we are unable to meet our gross margin target for any period or the target set by analysts, the trading price of our common stock may decline.

Our failure to estimate customer demand properly may result in excess or obsolete inventory or, conversely, may result in inadequate inventory levels, either of which could adversely affect our financial results.

Our inventory purchases are based upon future demand forecasts, which may not accurately predict the quantity or type of our products that our customers will want in the future. In forecasting demand, we must make multiple assumptions any of which may prove to be incorrect. Situations that may result in excess or obsolete inventory, which could result in write-downs of the value of our inventory and/or a forced reduction in average selling prices, and where our gross margin could be adversely affected include:

if there were a sudden and significant decrease in demand for our products;

if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements;

if we fail to estimate customer demand properly for our older products as our newer products are introduced; or

if our competition were to take unexpected competitive pricing actions.

Conversely, if we underestimate our customers’ demand for either our older or newer products, we may have inadequate manufacturing capability and may not be able to obtain sufficient inventory to fill our customers’ orders on a timely basis, which could affect our revenue results. Even if we are able to increase production levels to meet customer demand, we may not be able to do so in a cost effective manner. Inability to fill our customers' orders on a timely basis could damage our customer relationships, result in lost revenue, cause a loss in market share or damage our reputation.

Because we order materials in advance of anticipated customer demand our ability to reduce our inventory purchase commitments quickly in response to any revenue shortfalls is limited.

Substantially all of our sales are made on the basis of purchase orders rather than long-term agreements. As a result, we may commit resources to the production of products without having received advance purchase commitments from customers. Any inability to sell products to which we have devoted significant resources could harm our business. In addition, cancellation or deferral of product orders could result in our holding excess inventory, which could adversely affect our gross margin and restrict our ability to fund operations. We may build inventories during periods of anticipated growth. Additionally, because we often sell a substantial portion of our products in the last month of each quarter and, therefore, we recognize a substantial portion of our revenue in the last month of each quarter, we may not be able to reduce our inventory purchase commitments in a timely manner in response to any revenue shortfalls. We could be subject to excess or obsolete inventories and be required to take corresponding inventory write-downs if growth slows or if we incorrectly forecast product demand, which could negatively impact our gross margin and financial results.

We are dependent on key personnel and the loss of these employees could negatively impact our business.

Our performance is substantially dependent on the performance of our executive officers and key employees. None of our executive officers or employees is bound by an employment agreement, meaning our relationships with our executive officers and employees are at will. We do not have “key person” life insurance policies on any of our employees. The loss of the services of any of our executive officers, technical personnel or other key employees, particularly Jen-Hsun Huang, our President and Chief Executive Officer, would harm our business. Our success will depend on our ability to identify, hire, train and retain highly qualified technical and managerial personnel. Our failure to attract and retain the necessary technical and managerial personnel would harm our business. The integration of new executives or personnel could disrupt our ongoing operations.

Failure to achieve expected manufacturing yields for existing and/or new products would reduce our gross margin and could adversely affect our ability to compete effectively.

Semiconductor manufacturing yields are a function both of product design, which is developed largely by us, and process technology, which typically is proprietary to the manufacturer. Since low yields may result from either design or process technology failures, yield problems may not be effectively determined or resolved until an actual product exists that can be analyzed and tested to identify process sensitivities relating to the design rules that are used. As a result, yield problems may not be identified until well into the production process. Resolution of yield problems requires cooperation by and communication between us and the manufacturer.

Because of our potentially limited access to wafer fabrication capacity from our manufacturers, any decrease in manufacturing yields could result in an increase in our per unit costs and force us to allocate our available product supply among our customers. This could potentially harm customer relationships, our reputation, our revenue and our gross profit. Our wafer manufacturers may be unable to achieve or maintain acceptable manufacturing yields in the future. Our inability to achieve planned yields from our wafer manufacturers would reduce our gross margin. We also face the risk of product recalls or product returns resulting from design or manufacturing defects that are not discovered during the manufacturing and testing process. A significant number of product returns due to a defect or recall could damage our reputation and result in our customers working with our competitors.

To stay competitive, we may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively impact our operating results.

resources than anticipated in research and development efforts without an increase in revenue, our operating results would decline. In order to remain competitive, we anticipate that we will continue to devote substantial resources to research and development, and we expect these expenses to increase in absolute dollars in the foreseeable future due to the increased complexity and the greater number of products under development as well as hiring additional employees. Research and development expenses are likely to fluctuate from time to time to the extent we make periodic incremental investments in research and development and these investments may be independent of our level of revenue.

Our operating expenses are relatively fixed and we may have limited ability to reduce operating expenses quickly in response to any revenue shortfalls.

Our operating expenses, which are comprised of research and development expenses and sales, general and administrative expenses, represented 24.1% and 27.5% of our total revenue during fiscal 2006 and 2005, respectively. Operating expenses included litigation settlement costs of $14.2 million in fiscal 2006. Since we often recognize a substantial portion of our revenue in the last month of each quarter, we may not be able to adjust our operating expenses in a timely manner in response to any revenue shortfalls. If we are unable to reduce operating expenses quickly in response to any revenue shortfalls, our financial results would be negatively impacted.

Failure to transition to new manufacturing process technologies could adversely affect our operating results and gross margin.

Our strategy is to utilize the most advanced manufacturing process technology appropriate for our products and available from commercial third-party foundries. Use of advanced processes may have greater risk of initial yield problems and higher product cost. Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development. We continuously evaluate the benefits of migrating to smaller geometry process technologies in order to improve performance and reduce costs. We currently use 0.15 micron, 0.14 micron, 0.13 micron, 0.11 micron, and 90 nanometer process technologies for our families of GPUs, MCPs and Handheld GPUs.

We have experienced difficulty in migrating to new manufacturing processes in the past and, consequently, have suffered reduced yields, delays in product deliveries and increased expense levels. We may face similar difficulties, delays and expenses as we continue to transition our products to smaller geometry processes. Moreover, we are dependent on our relationships with our third-party manufacturers to migrate to smaller geometry processes successfully. The inability by us or our third-party manufacturers to effectively and efficiently transition to new manufacturing process technologies may adversely affect our operating results and our gross margin.

Our operating results are unpredictable and may fluctuate, and if our operating results are below the expectations of securities analysts or investors, the trading price of our stock could decline.

Any one or more of the factors discussed in this Annual Report on Form 10-K/A or other factors could prevent us from achieving our expected future revenue or net income. Accordingly, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of future performance. In addition, the results of any quarterly or full fiscal year period are not necessarily indicative of results to be expected for a subsequent quarter or a full fiscal year.

Risks Related to Our Products

If we are unable to achieve design wins, our products may not be adopted by our target markets and customers either of which could negatively impact our financial results.

The future success of our business depends to a significant extent on our ability to develop new competitive products for our target markets and customers. We believe achieving design wins, which entails having our existing and future products chosen for hardware components or subassemblies designed by PC OEMs, ODMs, and add-in board and motherboard manufacturers, will aid our future success. Our OEM, ODM, and add-in board and motherboard manufacturers’ customers typically introduce new system configurations as often as twice per year, typically based on spring and fall design cycles. Accordingly, when our customers are making their design decisions, our existing products must have competitive performance levels or we must timely introduce new products in order to be included in new system configurations. This requires that we do the following:

anticipate the features and functionality that customers and consumers will demand;

incorporate those features and functionalities into products that meet the exacting design requirements of OEMs, ODMs, and add-in board and motherboard manufacturers;

price our products competitively; and

9introduce products to the market within the limited design cycle for OEMs, ODMs, and add-in board and motherboard manufacturers.

If OEMs, ODMs, and add-in board and motherboard manufacturers do not include our products in their systems, they will typically not use our products in their design systems until at least the next design configuration. Therefore, we endeavor to develop close relationships with our OEMs and ODMs in an attempt to allow us to better anticipate and address customer needs in new products so that our products will achieve design wins.

Our ability to achieve design wins also depends in part on our ability to identify and ensure compliance with evolving industry standards. Unanticipated changes in industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers, including AMD, Intel and Microsoft. Such changes would require us to invest significant time and resources to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industry standards for a significant period of time, our ability to achieve design wins could suffer. If we are unable to achieve new design wins for existing or new customers, we may lose market share and our operating results would be negatively impacted.

Achievement of design wins may not result in the success of our products and could result in a loss of market share.

The process of being qualified for inclusion in an OEM product can be lengthy and could cause us to miss a cycle in the demand of end users for a particular product feature, which also could result in a loss of market share and harm our business. Even if we do have design wins for OEM and ODM products, we may not be able to successfully develop or introduce new products in sufficient volumes within the appropriate time to meet both the OEM, ODM, add-in board and motherboard manufacturers’ design cycles as well as other market demand. Additionally, even if we achieve a significant number of design wins, there can be no assurance that our OEM and ODM customers will actually take the design to production or that the design will be commercially successful. Furthermore, there may be changes in the timing of product orders due to unexpected delays in the introduction of our customers’ products that could negatively impact the success of our products. Any of these factors could result in a loss of market share and could negatively impact our financial results.

Our business results could be adversely affected if our product development efforts are unsuccessful.

We have in the past experienced delays in the development of some new products. Any delay in the future or failure of our GPUs or other processors to meet or exceed specifications of competitive products could materially harm our business. The success of our new product introductions will depend on many factors, including the following:

proper new product definition;

timely completion and introduction of new product designs;

the ability of third-party manufacturers to effectively manufacture our new products in a timely manner;

dependence on third-party subcontractors for assembly, testing and packaging of our products and in meeting product delivery schedules and maintaining product quality;

the quality of any new products;

differentiation of new products from those of our competitors;

market acceptance of our products and our customers' products; and

availability of adequate quantity and configurations of various types of memory products.

A critical component of our product development effort is our partnerships with leaders in the computer aided design, or CAD, industry. We have invested significant resources to develop relationships with industry leaders, including Cadence Design Systems, Inc. and Synopsys, Inc., often assisting these companies in the product definition of their new products. We believe that forming these relationships and utilizing next-generation development tools to design, simulate and verify our products will help us remain at the forefront of the 3D graphics, communications and networking segments and develop products that utilize leading-edge technology on a rapid basis. We believe this approach assists us in meeting the new design schedules of PC OEMs and other manufacturers. If these relationships are not successful, we may not be able to develop new products in a timely manner, which could result in a loss of market share, a decrease in revenue and a negative impact on our operating results. Our failure to successfully develop, introduce or achieve market acceptance for new processors would harm our business.

Our failure to identify new market or product opportunities or develop new products could harm our business.

As our GPUs or other processors develop and competition increases, we anticipate that product life cycles at the high end will remain short and average selling prices will decline. In particular, we expect average selling prices and gross margins for our processors to decline as each product matures and as unit volume increases. As a result, we will need to introduce new products and enhancements to existing products to maintain or improve overall average selling prices and gross margins. In order for our processors to achieve high volumes, leading PC OEMs, ODMs, and add-in board and motherboard manufacturers must select our processor for design into their products, and then successfully complete the designs of their products and sell them. We may be unable to successfully identify new product opportunities or to develop and bring to market new products in a timely fashion. In addition, we cannot guarantee that new products we develop will be selected for design into PC OEMs’, ODMs’, and add-in board and motherboard manufacturers’ products, that any new designs will be successfully completed or that any new products will be sold.

As the complexity of our products and the manufacturing process for our products increases, there is an increasing risk that we will experience problems with the performance of our products and that there will be delays in the development, introduction or volume shipment of our products. We may experience difficulties related to the production of current or future products or other factors that may delay the introduction or volume sale of new products we develop. In addition, we may be unable to successfully manage the production transition risks with respect to future products. Failure to achieve any of the foregoing with respect to future products or product enhancements could result in rapidly declining average selling prices, reduced margins and reduced demand for products or loss of market share. In addition, technologies developed by others may render our processors non-competitive or obsolete or result in our holding excess inventory, any of which would harm our business.

We could suffer a loss of market share if our products contain significant defects.

commercial shipments could result in failure to achieve market acceptance or loss of design wins. Our products typically go through only one verification cycle prior to beginning volume production and distribution. As a result, our products may contain defects or flaws that are undetected prior to volume production and distribution. If these defects or flaws exist and are not detected prior to volume production and distribution, we may be required to reimburse customers for costs to repair or replace the affected products in the field. We may also be required to incur additional research and development costs to find and correct the defect, which could divert the attention of our management and engineers from the development of new products. These costs could be significant and could adversely affect our business and operating results. We may also suffer a loss of reputation and/or a loss in our market share, either of which could materially harm our financial results.

Risks

Related to Our Partners and Customers

There can be no assurance that the PlayStation3 will achieve long term commercial success.

In April 2005, we finalized our definitive agreement with SCE to jointly develop a custom GPU incorporating our next-generation GeForce GPU and SCE’s system solutions in SCE’s PlayStation3. Our collaboration with SCE includes license fees and royalties for the PlayStation3 and all derivatives, including next-generation digital consumer electronics devices. In addition, we are licensing software development tools for creating shaders and advanced graphics capabilities to SCE. During fiscal 2006, we recognized $49.0 million of revenue from our contractual arrangements with SCE to jointly develop a custom GPU incorporating our next-generation GeForce GPU and SCE’s system solutions in SCE’s PlayStation3. Depending on the ultimate success of this next-generation platform, we expect to generate, starting in fiscal 2007, revenue ranging from $50 million to $100 million annually from license fees and royalties over the next five years, with the possibility of additional royalties for several years thereafter. There can be no assurance that the PlayStation3 will achieve long term commercial success, given the intense competition in the game console market. Additionally, we do not have control over the launch date or pricing of the Playstation3. As such, we do not have control over when we will receive royalties. If we do not receive royalties as we anticipate, our revenue and gross margin may be adversely affected.

We may not be able to realize the potential financial or strategic benefits of business acquisitions, which could hurt our ability to grow our business, develop new products or sell our products.

In the past we have acquired and invested in other businesses that offered products, services and technologies that we believed would help expand or enhance our products and services or help expand our distribution channels. We may enter into future acquisitions of, or investments in, businesses, in order to complement or expand our current businesses or enter into a new business market. For example, in February 2006 we completed the acquisition of ULi Electronics, Inc., or ULi, a leading developer of core logic technology, for approximately $53 million paid in cash. If we do consider an acquisition, strategic alliance or joint venture, the negotiations could divert management’s attention as well as other resources. For any previous or future acquisition or investment, including ULi, the following risks could impair our ability to grow our business and develop new products, and ultimately, could impair our ability to sell our products, which could negatively impact our growth or our financial results:

difficulty in combining the technology, products, operations or workforce of the acquired business with our business;

disruption of our ongoing businesses:

difficulty in realizing the potential financial or strategic benefits of the transaction;

diversion of management’s attention from our business;

difficulty in maintaining uniform standards, controls, procedures and policies;

disruption of or delays in ongoing research and development efforts;

diversion of capital and other resources;

assumption of liabilities;

diversion of resources and unanticipated expenses resulting from litigation arising from potential or actual business acquisitions or investments;

difficulties in entering into new markets in which we have limited or no experience and where competitors in such markets have stronger positions; and

impairment of relationships with employees and customers, or the loss of any of our key employees or of our target’s key employees, as a result of the integration of new businesses and management personnel.

In addition, the consideration for any future acquisition could be paid in cash, shares of our common stock, the issuance of convertible debt securities or a combination of cash, convertible debt and common stock. If we pay all or a portion of the purchase price in cash, our cash reserves would be reduced. If the consideration is paid with shares of our common stock, or convertible debentures, the holdings of our existing stockholders would be diluted. We cannot forecast the number, timing or size of future acquisitions, or the effect that any such acquisitions might have on our operations or financial results.

We sell our products to a small number of customers and our business could suffer by the loss of any of these customers.

We have only a limited number of customers and our sales are highly concentrated. Sales to our two largest customers accounted for approximately 26%, 31%, and 36% of our revenue during fiscal 2006, 2005 and 2004, respectively. During the first quarter of fiscal 2006, Microsoft indicated that it would not order any more Xbox-related products from us after our second fiscal quarter. As a result, the second quarter of fiscal 2006 was the last quarter during which we recognized revenue from the sale of our Xbox-related products to Microsoft. Although a small number of our other customers represents the majority of our revenue, their end customers include a large number of OEMs and system integrators throughout the world who, in many cases, specify the graphics supplier. Our sales process involves achieving key design wins with leading PC OEMs and major system builders and supporting the product design into high volume production with key CEMs, ODMs, motherboard and add-in board manufacturers. These design wins in turn influence the retail and system builder channel that is serviced by CEMs, ODMs, motherboard and add-in board manufacturers. Our distribution strategy is to work with a small number of leading independent CEMs, ODMs, motherboard manufacturers, add-in board manufacturers and distributors, each of which has relationships with a broad range of system builders and leading PC OEMs. If we were to lose sales to our PC OEMs, CEMs, ODMs, motherboard and add-in board manufacturers and were unable to replace the lost sales with sales to different customers, or if they were to significantly reduce the number of products they order from us, our revenue may not reach or exceed the expected level in any period, which could harm our financial condition and our results of operations.

We depend on foundries and independent contractors to manufacture our products and these third parties may not be able to satisfy our manufacturing requirements, which would harm our business.

We do not manufacture the semiconductor wafers used for our products and do not own or operate a wafer fabrication facility. Our products require wafers manufactured with state-of-the-art fabrication equipment and techniques. We utilize industry-leading suppliers, such as Chartered, SMIC, TSMC, and UMC to produce our semiconductor wafers and utilize independent subcontractors to perform assembly, testing and packaging. We depend on these suppliers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields, and to deliver those products to us on a timely basis at acceptable prices. These manufacturers may be unable to meet our near-term or long-term manufacturing or pricing requirements. We obtain manufacturing services on a purchase order basis. The foundries we use have no obligation to provide us with any specified minimum quantities of product. Suppliers, such as Chartered, SMIC, TSMC, and UMC, fabricate wafers for other companies, including some of our competitors, and could choose to prioritize capacity for other users, reduce or eliminate deliveries to us, or increase the prices that they charge us on short notice. If we are unable to meet customer demand due to reduced or eliminated deliveries, we could lose sales to customers, which would negatively impact our revenue and our reputation. Because the lead-time needed to establish a strategic relationship with a new manufacturing partner could be several quarters, there is no readily available alternative source of supply for any specific product. In addition, the time and effort to qualify a new foundry could result in additional expense, diversion of resources or lost sales any of which would negatively impact our financial results. We believe that long-term market acceptance for our products will depend on reliable relationships with third-party manufacturers we may use to ensure adequate product supply and competitive pricing so that we are able to respond to customer demand.

We are dependent on third parties located outside of the United States for assembly, testing and packaging of our products, which reduces our control over the delivery and quantity of our products.

Our processors are assembled and tested by independent subcontractors, such as ASE, Amkor Technology Inc., KYEC, SPIL, and STATS ChipPAC Incorporated, all of which are located outside of the United States. We do not have long-term agreements with any of these subcontractors. As a result of our dependence on third-party subcontractors for assembly, testing and packaging of our products, we do not directly control product delivery schedules or product quality. Demand for qualified independent subcontractors to assemble and test products is high. If demand for these subcontractors exceeds the number of qualified subcontractors, we may experience capacity constraints, which could result in product shortages, a decrease in the quality of our products or an increase in product cost. Any of our subcontractors may decide to prioritize the orders of one of our competitors over our orders. Any product shortages, quality assurance problems or political instability outside of the United States could increase the costs of manufacture, assembly or testing of our products, which could cause our gross margin to decline. Due to the amount of time typically required to qualify assemblers and testers, we could experience significant delays in the shipment of our products if we are required to find alternative third parties to assemble or test our products or components. Any such delays could result in a loss of reputation or a decrease in sales to our customers.

We rely on third-party vendors to supply software development tools to us for the development of our new products and we may be unable to obtain the tools necessary to develop these products.

In the design and development of new products and product enhancements, we rely on third-party software development tools. While we currently are not dependent on any one vendor for the supply of these tools, some or all of these tools may not be readily available in the future. For example, we have experienced delays in the introduction of products in the past as a result of the inability of then available software development tools to fully simulate the complex features and functionalities of our products. The design requirements necessary to meet consumer demands for more features and greater functionality from processors in the future may exceed the capabilities of the software development tools that are available to us. If the software development tools we use become unavailable or fail to produce designs that meet consumer demands, our business could suffer.

Difficulties in collecting accounts receivable could result in significant charges against income and the deferral of revenue recognition from sales to affected customers, which could harm our operating results and financial condition.

Our accounts receivable are highly concentrated and make us vulnerable to adverse changes in our customers' businesses and to downturns in the economy and the industry. In addition, difficulties in collecting accounts receivable or the loss of any significant customer could materially and adversely affect our financial condition and results of operations. We continue to work directly with more foreign customers and it may be difficult to collect accounts receivable from them. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. In addition, we purchase credit insurance on selected customers’ accounts receivable balances in an effort to further mitigate our exposure for such losses. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required, we may be required to defer revenue recognition on sales to affected customers and we may be required to pay higher credit insurance premiums, which could adversely affect our operating results. We may have to record additional reserves or write-offs and/or defer revenue on certain sales transactions in the future, which could negatively impact our financial results.

Risks Related to Our Competition

The market for GPU, MCP, and Handheld GPUs is highly competitive and we may be unable to compete.

The market for GPUs, MCPs and Handheld GPUs is intensely competitive and is characterized by rapid technological change, evolving industry standards and declining average selling prices. We believe that the principal competitive factors in this market are performance, breadth of product offerings, access to customers and distribution channels, backward-forward software support, conformity to industry standard APIs, manufacturing capabilities, price of processors and total system costs of add-in boards and motherboards. We believe that our ability to remain competitive will depend on how well we are able to anticipate the features and functions that customers will demand and whether we are able to deliver consistent volumes of our products at acceptable levels of quality. We expect competition to increase both from existing competitors and new market entrants with products that may be less costly than ours, or may provide better performance or additional features not provided by our products, which could harm our business.

An additional significant source of competition is from companies that provide or intend to provide GPU, MCP, and Handheld GPU solutions. Some of our competitors may have or be able to obtain greater marketing, financial, distribution and manufacturing resources than we do and may be more able to adapt to customer or technological changes. Our current competitors include the following:

suppliers of discrete MCPs that incorporate a combination of networking, audio, communications and input/output, or I/O, functionality as part of their existing solutions, such as ATI Technologies, Inc., or ATI, Broadcom Corporation, or Broadcom, and Intel;

suppliers of GPUs, including MCPs that incorporate 3D graphics functionality as part of their existing solutions, such as ATI, Intel, Matrox Electronics Systems Ltd., Silicon Integrated Systems, Inc., VIA Technologies, Inc., and XGI Technology Inc.; and

suppliers of GPUs or GPU intellectual property for handheld and embedded devices that incorporate advanced graphics functionality as part of their existing solutions, such as ATI, Bitboys, Broadcom, Fujitsu Limited, Imagination Technologies Ltd., NEC Corporation, Qualcomm Incorporated, Renesas Technology Corp., Seiko-Epson, Texas Instruments Incorporated, and Toshiba America, Inc.

If and to the extent we offer products outside of the consumer and enterprise PC, notebook, workstation, PDA, cellular phone, and video game console markets, we may face competition from some of our existing competitors as well as from companies with which we currently do not compete. We cannot accurately predict if we will compete successfully in any new markets we may enter. If we are unable to compete in our current and any new markets, our financial results will suffer.

As Intel continues to pursue platform solutions, we may not be able to successfully compete.

We expect substantial competition from Intel’s publicized focus on moving to selling platform solutions dominated by Intel products, such as when Intel achieved success with its Centrino platform solution. In addition to its current Centrino notebook platform initiative, and its announced upcoming desktop initiative branded as VIIV, we expect that Intel is now focused on developing and selling platform solutions for all segments including professional workstations and servers. If Intel continues to pursue these initiatives, we may not be able to successfully compete in these segments.

Risks Related to Market Conditions

We are subject to risks associated with international operations which may harm our business.

customers outside of the United States and other Americas subjects us to a number of risks associated with conducting business outside of the United States and other Americas, including, but not limited to:

international economic and political conditions;

unexpected changes in, or impositions of, legislative or regulatory requirements;

labor issues in foreign countries;

cultural differences in the conduct of business;

inadequate local infrastructure;

delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers and restrictions;

transportation delays;

longer payment cycles;

difficulty in collecting accounts receivable;

fluctuations in currency exchange rates;

imposition of additional taxes and penalties;

different legal standards with respect to protection of intellectual property;

the burdens of complying with a variety of foreign laws; and

•

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other factors beyond our control, including terrorism, civil unrest, war and diseases such as severe acute respiratory syndrome and the Avian flu.

If sales to any of our customers outside of the United States and other Americas are delayed or cancelled because of any of the above factors, our revenue may be negatively impacted.

We have offices outside of the United States, including offices in Taiwan, Japan, Korea, China, Hong Kong, India, France, Russia, Germany and England. During fiscal 2006, we substantially increased our international employee resources from 242 employees as of January 30, 2005 to 615 full-time employees as of January 29, 2006. On February 20, 2006, we completed the acquisition of ULi, a leading developer of core logic technology, which added approximately 200 employees to our international operations. Our operations in our international locations are subject to many of the risks contained in the above list. We intend to continue to expand our international operations and to open other international offices. Difficulties with our international operations, including finding appropriate staffing and office space, may divert management’s attention and other resources any of which could negatively impact our operating results.

Currently, all of our arrangements with third-party manufacturers and subcontractors provide for pricing and payment in United States dollars as are sales to our customers located outside of the United States and other Americas. Increases in the value of the United States’ dollar relative to other currencies would make our products more expensive, which would negatively impact our ability to compete. Conversely, decreases in the value of the United States’ dollar relative to other currencies could result in our suppliers raising their prices in order to continue doing business with us. To date, we have not engaged in any currency hedging activities, although we may do so in the future. Fluctuations in currency exchange rates could harm our business in the future.

We are dependent on the PC market and the rate of its growth has and may in the future have a negative impact on our business.

We derive the majority of our revenue from the sale of products for use in the desktop PC and notebook PC markets, including professional workstations. We expect to continue to derive most of our revenue from the sale or license of products for use in the desktop PC and notebook PC markets in the next several years. A reduction in sales of PCs, or a reduction in the growth rate of PC sales, will reduce demand for our products. Moreover, changes in demand could be large and sudden. Since PC manufacturers often build inventories during periods of anticipated growth, they may be left with excess inventories if growth slows or if they incorrectly forecast product transitions. In these cases, PC manufacturers may abruptly suspend substantially all purchases of additional inventory from suppliers like us until the excess inventory has been absorbed, which would have a negative impact on our business.

If our products do not continue to be accepted by the consumer and enterprise PC, notebook, workstation, PDA, cellular phone, and video game console markets or if the demand in these markets for new and innovative products decreases, our business and operating results would suffer.

Our success depends in part upon continued broad adoption of our processors for 3D graphics in consumer and enterprise PC, notebook, workstation, PDA, cellular phone, and video game console applications. The market for processors has been characterized by unpredictable and sometimes rapid shifts in the popularity of products, often caused by the publication of competitive industry benchmark results, changes in pricing of dynamic random-access memory devices and other changes in the total system cost of add-in boards, as well as by severe price competition and by frequent new technology and product introductions. Only a small number of products have achieved broad market acceptance and such market acceptance, if achieved, is difficult to sustain due to intense competition and frequent new technology and product introductions. Since the GPU Business is our core business, our financial results would suffer if for any reason our current or future GPUs do not continue to achieve widespread acceptance in the PC market. If we are unable to complete the timely development of products or if we were unable to successfully and cost-effectively manufacture and deliver products that meet the requirements of the consumer and enterprise PC, notebook, and workstation markets, we may experience a decrease in revenue which could negatively impact our operating results. Additionally, there can be no assurance that the industry will continue to demand new products with improved standards, features or performance. If our customers and the market do not continue to demand new products with increased performance, features, functionality or standards, sales of our products could decline.

Our failure to comply with any applicable environmental regulations could result in a range of consequences, including fines, suspension of production, excess inventory, sales limitations, and criminal and civil liabilities.

We may be subject to various state, federal and international laws and regulations governing the environment, including restricting the presence of certain substances in electronic products and making producers of those products financially responsible for the collection, treatment, recycling and disposal of those products. For example, the semiconductor industry is moving towards becoming compliant with the Restriction of Hazardous Substances Directive, or RoHS Directive, which will become effective in July 2006. The RoHS Directive is European legislation that restricts the use of a number of substances, including lead. Similarly, the State of California has adopted certain restrictions, which go into effect in 2007, that restrict the use of certain materials in electronic products, that are intended to harmonize with the RoHS directive and other states are contemplating similar legislation. China has promulgated use restrictions on the same substances as the RoHS directive, but has not yet defined either the scope of the affected products or an effective date of any such restrictions.

Also, we could face significant costs and liabilities in connection with the Waste Electrical and Electronic Equipment Directive, or WEEE. The WEEE directs members of the European Union to enact laws, regulations, and administrative provisions to ensure that producers of electric and electronic equipment are financially responsible for the collection, recycling, treatment and environmentally responsible disposal of certain products sold into the market after August 15, 2005 and from products in use prior to that date that are being replaced. We continue to evaluate the impact of specific registration and compliance activities required by WEEE.

It is possible that unanticipated supply shortages, delays or excess non-compliant inventory may occur as a result of such regulations. Failure to comply with any applicable environmental regulations could result in a range of consequences including fines, suspension of production, excess inventory, sales limitations, and criminal and civil liabilities.

Hostilities involving the United States and/or terrorist attacks could harm our business.

The financial, political, economic and other uncertainties following the terrorist attacks on the United States in 2001 led to a weakening of the global economy. Similar terrorist acts and/or the threat of future outbreak or continued escalation of hostilities involving the United States and Iraq or other countries could adversely affect the growth rate of our revenue and have an adverse effect on our business, financial condition or results of operations. In addition, any escalation in these events or similar future events may disrupt our operations or those of our customers, distributors and suppliers, which could also adversely affect our business, financial condition or results of operations.

Our business is cyclical in nature and an industry downturn could harm our financial results.

Our business is directly affected by market conditions in the highly cyclical semiconductor industry, including alternating periods of overcapacity and capacity constraints, variations in manufacturing costs and yields, significant expenditures for capital equipment and product development and rapid technological change. If we are unable to respond to changes in our industry, which can be unpredictable and rapid, in an efficient and timely manner, our operating results could suffer. In particular, from time to time, the semiconductor industry has experienced significant and sometimes prolonged downturns characterized by diminished product demand and accelerated erosion of average selling prices. If we cannot take appropriate actions such as reducing our manufacturing or operating costs to sufficiently offset declines in demand during a downturn, our revenue and earnings will suffer.

Political instability in Taiwan and in The People’s Republic of China or elsewhere could harm our business.

Because of our reliance on foundries and independent contractors located in Taiwan and The People’s Republic of China, and because we have offices in these locations, our business may be harmed by political instability in Taiwan, including the worsening of the strained relations between The People’s Republic of China and Taiwan. Also if relations between the United States and The People’s Republic of China are strained due to foreign relations events. If any of our suppliers experienced a substantial disruption in their operations, as a result of a natural disaster, political unrest, economic instability, acts of terrorism or war, equipment failure or other cause, it could harm our business.

We are exposed to fluctuations in the market values of our portfolio investments and in interest rates.

We invest in a variety of financial instruments, consisting principally of investments in commercial paper, money market funds and highly liquid debt securities of corporations, municipalities and the United States government and its agencies. These investments are denominated in United States dollars.

We account for our investment instruments in accordance with SFAS No. 115. All of the cash equivalents and marketable securities are treated as “available-for-sale” under SFAS No. 115. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate debt securities may have their market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or if the decline in fair value of our publicly traded equity investments is judged to be other-than-temporary. We may suffer losses in principal if forced to sell securities that decline in market value due to changes in interest rates. However, because our debt securities are classified as “available-for-sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity.

Risks Related to Government Action, Regulatory Action, Intellectual Property, and Litigation

Expensing employee stock options in future periods will materially and aversely affect our reported operating results and could adversely affect our competitive position as well.

Since inception, we have used stock options and our employee stock purchase program as fundamental components of our compensation packages. We believe that these incentives directly motivate our employees and, through the use of vesting, encourage our employees to remain with us. As a result of adjustments arising from our restatement described in Note 2, “Restatement of Consolidated Financial Statements, Audit Committee and Company Findings”, of the Notes to our Consolidated Financial Statements, our operating results contain recorded amounts of stock-based compensation expense. For our fiscal years 2000 through 2006, this stock-based compensation expense was calculated using primarily the intrinsic value-based method under Accounting Principles Board Opinion No. 25, or APB 25,Accounting for Stock Issued to Employees and related interpretations. In December 2004, the FASB issued SFAS No. 123(R),Share-Based Payment, which requires the measurement and recognition of compensation expense for all stock-based compensation payments. In April 2005, the SEC delayed the effective date of SFAS No. 123(R), which is now effective for annual periods that begin after June 15, 2005. SFAS No. 123(R) requires that we record compensation expense for stock options and our employee stock purchase plan

using the fair value of those awards. Expensing these incentives in future periods will materially and adversely affect our reported operating results as the stock-based compensation expense would be charged directly against our reported earnings. We anticipate that our stock-based compensation expense will be approximately $18 to $22 million for the first quarter of fiscal 2007 and we are unsure how the market will react to this adverse affect on our operating results, which could impact our stock price.

To the extent that SFAS No. 123(R) makes it more expensive to grant stock options or to continue to have an employee stock purchase program, we may decide to incur increased cash compensation costs. In addition, actions that we may take to reduce stock-based compensation expense that may be more severe than any actions our competitors may implement may make it difficult to attract, retain and motivate employees, which could adversely affect our competitive position as well as our business and operating results.

We are currently involved in patent litigation, which, if not resolved favorably, could require us to pay damages.

We are currently involved in patent litigation. On October 19, 2004, Opti Incorporated, or Opti, filed a complaint for patent infringement against us in the United States District Court for the Eastern District of Texas. Opti asserts that unspecified NVIDIA chipsets infringe five United States patents held by Opti. Opti seeks unspecified damages for our alleged conduct, attorneys fees and triple damages because of our alleged willful infringement of these patents. NVIDIA filed a response to this complaint in December 2004. After a case management conference in July 2005, discovery began and a trial date has now been set for July 2006. A court mandated mediation was held in January 2006 and did not resolve the matter. We believe the claims asserted against us are without merit and we will continue to defend ourselves vigorously.

On December 19, 2005, AVG and substantially all of the named defendants and intervenors, including NVIDIA, settled all of pending claims; the only surviving claims will relate solely to two non-settling defendants. As part of the settlement, the defendants and intervenors paid an undisclosed aggregate amount to AVG. In exchange, all pending claims between the settling parties were dismissed with prejudice, and AVG granted to all settling parties a full release of all claims for past damages and a full license for all future sales of accused products under all of AVG’s patents, including the patents in suit. In addition, as part of the settlement, all settling defendants and intervenors fully and finally waived any claims for indemnification they may have had against any other settling party.

Our defenses against Opti may be unsuccessful. If this case goes forward, or if other patent litigation matters involving us arise, we expect that they will result in additional legal and other costs, such as those costs associated with the AVG suit, regardless of the outcome, which could be substantial.

Our industry is characterized by vigorous protection and pursuit of intellectual property rights and positions which could result in significant expense.

develop new products without infringing or misappropriating the intellectual property rights of others or by licensing the intellectual property of third parties. As such, we have licensed technology from third parties for incorporation into our products, and expect to continue to enter into license agreements with third parties for future products. These licenses may result in royalty payments to third parties, the cross licensing of technology by us or payment of other consideration. If these arrangements are not concluded on commercially reasonable terms, or at all, our competitive position and our business could suffer.

Our ability to compete will be harmed if we are unable to adequately protect our intellectual property.

We rely primarily on a combination of patents, trademarks, trade secrets, employee and third-party nondisclosure agreements and licensing arrangements to protect our intellectual property in the United States and internationally. We have numerous patents issued, allowed and pending in the United States and in foreign countries. Our patents and pending patent applications relate to technology used by us in connection with our products, including our processors. We also rely on international treaties and organizations and foreign laws to protect our intellectual property. The laws of certain foreign countries in which our products are or may be manufactured or sold, including various countries in Asia, may not protect our products or intellectual property rights to the same extent as by the laws of the United States. This makes the possibility of piracy of our technology and products more likely. We continuously assess whether and where to seek formal protection for particular innovations and technologies based on such factors as the:

commercial significance of our operations and our competitors’ operations in particular countries and regions;

location in which our products are manufactured;

our strategic technology or product directions in different countries; and

degree to which intellectual property laws exist and are meaningfully enforced in different jurisdictions.

Litigation to defend against alleged infringement of intellectual property rights or to enforce our intellectual property rights and the outcome of such litigation could result in substantial costs to us.

From time to time we receive notices or are included in legal actions alleging that we have infringed patents or other intellectual property rights owned by third parties. We expect that, as the number of issued hardware and software patents increases, and as competition in our product lines intensifies, the volume of intellectual property infringement claims may increase. We may become involved in future lawsuits or other legal proceedings alleging patent infringement or other intellectual property rights violations by us or by our customers that we have agreed to indemnify them for certain claims of infringement arising out of the sale of our products to these customers. In addition, litigation or other legal proceedings may be necessary to:

assert claims of infringement;

enforce our patents

protect our trade secrets or know-how; or

determine the enforceability, scope and validity of the propriety rights of others.

If infringement claims are made against us, we may seek licenses under the claimants’ patents or other intellectual property rights. In addition, we or an indemnified customer may be required to obtain a license to a third parties’ patents or intellectual property. However, licenses may not be offered to us at all or on terms acceptable to us, particularly by competitors. If we fail to obtain a license from a third party for technology that we use or that is used in one of our products used by an indemnified customer, we could be subject to substantial liabilities or have to suspend or discontinue the manufacture and sale of one or more of our products either of which could reduce our revenue and harm our business. Furthermore, the indemnification of a customer may increase our operating expenses which could negatively impact our operating results.

Alternatively, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights, which could be costly. If we have to initiate a claim, our operating expenses may increase which could negatively impact our operating results. Additionally, if one of our patents is invalidated or found to be unenforceable, we would be unable to license the patent which could result in a loss of revenue.

Regardless of the outcome, litigation or negotiations involving intellectual property rights can be very costly and can divert management’s attention from other matters. We may be unsuccessful in defending or pursuing these lawsuits or claims. An unfavorable ruling could include significant damages, invalidation of a patent or family of patents, indemnification of customers, payment of lost profits, or, when it has been sought, injunctive relief.

Our operating results may be adversely affected if we are subject to unexpected tax liabilities.

We are subject to taxation by a number of taxing authorities both in the United States and throughout the world. Tax rates vary among the jurisdictions in which we operate. Significant judgment is required in determining our provision for our income taxes as there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, any of the below could cause our effective tax rate to be materially different than that which is reflected in historical income tax provisions and accruals:

the jurisdictions in which profits are determined to be earned and taxed;

adjustments to estimated taxes upon finalization of various tax returns;

changes in available tax credits;

changes in share-based compensation expense;

changes in tax laws, the interpretation of tax laws either in the United States or abroad or the issuance of new interpretative accounting guidance related to uncertain transactions and calculations where the tax treatment was previously uncertain; and

the resolution of issues arising from tax audits with various tax authorities.

Should additional taxes be assessed as a result of any of the above, our operating results could be adversely affected.

While we believe that we currently have adequate internal control over financial reporting, we are exposed to risks from legislation requiring companies to evaluate those internal controls.

Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control structure and procedures for financial reporting. We have an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements. This legislation is relatively new and neither companies nor accounting firms have significant experience in complying with its requirements. As a result, we have incurred, and expect to continue to incur increased expense and to devote additional management resources to Section 404 compliance. In the event that our chief executive officer, chief financial officer or our independent registered public accounting firm determine that our internal control over financial reporting is not effective as defined under Section 404, investor perceptions of us may be adversely affected and could cause a decline in the market price of our stock.

Risks Related to our Common Stock

Our stock price may continue to experience significant short-term fluctuations.

The trading price of our common stock has fluctuated greatly. These price fluctuations have been rapid and severe. We believe that our quarterly and annual results of operations may continue to be affected by a variety of

factors that could harm our revenue, gross profit and results of operations, any of which could impact our stock price. Additionally, the price of our common stock may continue to fluctuate greatly in the future due to factors that are non-company specific, such as the decline in the United States and/or international economies, acts of terror against the United States, war or due to a variety of company specific factors, including quarter to quarter variations in our operating results, shortfalls in revenue, gross margin or earnings from levels expected by securities analysts and the other factors discussed in these risk factors.

Provisions in our certificate of incorporation, our bylaws and our agreement with Microsoft could delay or prevent a change in control.

Our certificate of incorporation and bylaws contain provisions that could make it more difficult for a third party to acquire a majority of our outstanding voting stock. These provisions include the following:

the ability of the board of directors to create and issue preferred stock without prior stockholder approval;

the prohibition of stockholder action by written consent;

a classified board of directors; and

advance notice requirements for director nominations and stockholder proposals.

On March 5, 2000, we entered into an agreement with Microsoft in which we agreed to develop and sell graphics chips and to license certain technology to Microsoft and its licensees for use in the Xbox. Under the agreement, if an individual or corporation makes an offer to purchase shares equal to or greater than 30% of the outstanding shares of our common stock, Microsoft may have first and last rights of refusal to purchase the stock. The Microsoft provision and the other factors listed above could also delay or prevent a change in control of NVIDIA.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We believe that our existing cash balances and anticipated cash flows from operations will be sufficient to meet our operating, acquisition and capital requirements for at least the next 12 months. However, there is no assurance that we will not need to raise additional equity or debt financing within this time frame. Additional financing may not be available on favorable terms or at all and may be dilutive to our then-current stockholders. We also may require additional capital for other purposes not presently contemplated. If we are unable to obtain sufficient capital, we could be required to curtail capital equipment purchases or research and development expenditures, which could harm our business. Factors that could affect our cash used or generated from operations and, as a result, our need to seek additional borrowings or capital include:

decreased demand and market acceptance for our products and/or our customers’ products;

inability to successfully develop and produce in volume production our next-generation products;

~~decreased demand~~competitive pressures resulting in lower than expected average selling prices; and ~~market acceptance for our products and/or our customers’ products;~~

new product announcements or product introductions by our competitors.

~~inability to successfully develop and produce in volume production our next-generation products;~~

~~competitive pressures resulting in lower than expected average selling prices; and~~

~~new product announcements or product introductions by our competitors.~~

For additional factors see ~~“Business Risks~~“Item 1A. Risk Factors - Risks Related to Our Operations - Our operating results are unpredictable and may fluctuate, and if our operating results are below the expectations of securities analysts or investors, our stock price could decline.”

~~Shelf Registration Statement~~

In December 2003, we filed a Form S-3 with the SEC under its "shelf" registration process. This shelf registration was declared effective by the SEC on March 25, 2004. Under this shelf registration statement, we may sell common stock, preferred stock, debt securities, warrants, stock purchase contracts and/or stock purchase units in one or more offerings up to a total dollar amount of $500.0 million. Unless otherwise indicated in the applicable prospectus supplement, we intend to use the proceeds for working capital and general corporate purposes.

3dfx Asset Purchase

The 3dfx asset purchase closed on April 18, 2001. Under the terms of the Asset Purchase Agreement, the cash consideration due at the closing was $70.0 million, less $15.0 million that was loaned to 3dfx pursuant to a Credit Agreement dated December 15, 2000. The Asset Purchase Agreement also provided, subject to the other provisions thereof, that if 3dfx properly certified that all its debts and other liabilities had been provided for, then we would have been obligated to pay 3dfx two million shares of NVIDIA common stock. If 3dfx could not make such a certification, but instead properly certified that its debts and liabilities could be satisfied for less than $25.0 million, then 3dfx could have elected to receive a cash payment equal to the amount of such debts and liabilities and a reduced number of shares of our common stock, with such reduction calculated by dividing the cash payment by $25.00 per share. If 3dfx could not certify that all of its debts and liabilities had been provided for, or could not be satisfied, for less than $25.0 million, we would not be obligated under the agreement to pay any additional consideration for the assets. ~~We are currently party~~In October 2002, 3dfx filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern District of California. In March 2003, we were served with a complaint filed by the Trustee appointed by the Bankruptcy Court which sought, among other things, payments from us as additional purchase price related to ~~litigation relating to~~our purchase of certain ~~aspects~~assets of 3dfx. In early November 2005, after many months of mediation, NVIDIA and the Official Committee of Unsecured Creditors of 3dfx reached a conditional settlement of the ~~asset~~Trustee’s claims against NVIDIA. This conditional settlement, which will be subject to the review and approval of the Bankruptcy Court, calls for a payment of approximately $30.6 million to the 3dfx estate. Under the settlement, $5.6 million relates to various administrative expenses and Trustee fees, and $25.0 million relates to the satisfaction of debts and liabilities owed to the general unsecured creditors of 3dfx. As such, during the three months ended October 30, 2005, we recorded $5.6 million as a charge to settlement costs and $25.0 million as additional purchase ~~and 3dfx’s subsequent bankruptcy in October 2002.~~price for 3dfx. Please refer to ~~Item 3: Legal Proceedings~~Note 12 of the Notes to Consolidated Financial Statements for further information regarding this litigation.

Contractual Obligations

The following summarizes our contractual obligations that are ~~both~~not on our ~~balance sheet and off~~ balance sheet as of January ~~30, 2005~~29, 2006 and the effect such obligations are expected to have on our liquidity and cash flow in future periods:

Contractual Obligations

Total

Within 1 Year

2-3 Years

4-5 Years

After 5 Years

(in thousands)

Capital lease obligations, including interest $ 869 $ 869 $ -- $ -- $ --
Operating leases 191,117 27,534 54,847 52,942 55,794
Purchase obligations (1) 457,273 457,273 -- -- --
Other liabilities reflected on our balance sheet under GAAP 4,375 2,000 2,375 -- --
Total contractual obligations $ 653,634 $ 487,676 $ 57,222 $ 52,942 $ 55,794

~~_________________~~

~~(1)~~


Contractual Obligations	Total		Within 1 Year		2-3 Years		4-5 Years		After 5 Years
	(in thousands)
Operating leases	$	172,483	$	29,557	$	57,717	$	55,606	$	29,603
Purchase obligations (1)		401,571		401,571		—		—		—

Total contractual obligations	$	574,054	$	431,128	$	57,717	$	55,606	$	29,603

(1)	Represents our inventory purchase commitments as of January 29, 2006.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements as defined in Regulation S-K 303(a)(4)(ii).

Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 123(R), or SFAS No. 123(R),Share-Based Payment, which requires the measurement and recognition of compensation expense for all stock-based compensation payments. In April 2005, the SEC delayed the effective date of SFAS No. 123(R), which is now effective for annual periods that begin after June 15, 2005. In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or SAB No. 107, which includes interpretive guidance for the initial implementation of SFAS No. 123(R). SFAS No. 123(R) allows for either prospective recognition of compensation expense or retrospective recognition. We intend to adopt SFAS No. 123(R) using the modified prospective method, which requires the application of the accounting standard as of January 30, ~~2005.~~

~~Recently Issued Accounting Pronouncements~~

~~In March 2004,~~2006, the ~~FASB approved~~first day of our fiscal 2007. Expensing these incentives in future periods will materially and adversely affect our reported operating results as the ~~consensus reached~~stock-based compensation expense would be charged directly against our reported earnings. We anticipate that our stock-based compensation expense will be approximately $18 to $22 million for the first quarter of fiscal 2007 and we are unsure how the market will react to this adverse affect on our operating results, which could impact our stock price.

During the ~~Emerging Issues Task Force Issue~~first quarter of fiscal 2006, we transitioned from a Black-Scholes model to a binomial model for calculating the estimated fair value of new stock-based compensation awards granted under our stock option plans. As a result of recent regulatory guidance, including SAB No. ~~03-1, or EITF 03-1,~~~~The Meaning~~107, and in anticipation of ~~Other-Than-Temporary Impairment~~the impending effective date of SFAS No. 123(R), we reevaluated the assumptions we use to estimate the value of employee stock options and ~~Its Application to Certain Investments.EITF 03-1 provides guidance for identifying impaired investments~~shares issued under our employee stock purchase plan, beginning with stock options granted and ~~new disclosure requirements for investments~~shares issued under our employee stock purchase plan in our first quarter of fiscal 2006. We determined that ~~are deemed~~the use of implied volatility is expected to be ~~temporarily impaired. On September 30, 2004,~~more reflective of market conditions and, therefore, can reasonably be expected to be a better indicator of expected volatility than historical volatility. Additionally, in the first quarter of fiscal 2006, we began segregating options into groups for employees with relatively homogeneous exercise behavior in order to make full use of the capabilities of the binomial valuation model. As such, the expected term is based on detailed historical data about employees' exercise behavior, vesting schedules, and death and disability probabilities. We believe the resulting binomial calculation provides a more refined estimate of the fair value of our employee stock options. For our employee stock purchase plan, we decided to continue to use the Black-Scholes model to calculate the estimated fair value.

In June 2005, the FASB issued a final staff position EITF Issue 03-1-1 that delays the effective date for the measurement and recognition guidance included in paragraphs 10 through 20 of EITF 03-1. Quantitative and qualitative disclosures required by EITF 03-1 remain effective for fiscal 2005. We do not believe the impact of adoption of this EITF consensus will~~have a material impact on our consolidated financial position, results of operations or cash flows.~~

~~In November 2004, the FASB issued~~SFAS No. ~~151,~~154, or SFAS No. ~~151,~~~~Inventory Costs~~,~~an amendment~~154,Accounting Changes and Error Corrections, a replacement of ~~ARB~~APB Opinion No. ~~43, Chapter 4.~~20 and FASB Statement No. 3. SFAS No. ~~151 amends ARB No. 43, Chapter 4,~~154 applies to ~~clarify that abnormal amounts~~all voluntary changes

in accounting principle, and changes the requirements for accounting for and reporting of ~~idle facility expense, freight, handling costs and wasted material (spoilage) should be recognized as current period charges. In addition,~~a change in accounting principle. We will adopt SFAS ~~No. 151 requires that allocation~~154 during the first quarter of ~~fixed production overhead to the cost of conversion be based on the normal capacity of the production facilities. The provision of SFAS No. 151 shall be effective for inventory costs incurred during~~ fiscal ~~years beginning after June 15, 2005.~~2007. We do not expect the adoption of SFAS No. ~~151~~154 to have a material impact on our consolidated financial position, results of operations or cash flows.

In ~~December 2004,~~June 2005, the FASB ~~issued SFAS~~ratified the Emerging Issues Task Force’s, or EITF’s, Issue No. ~~153,~~05-06, or ~~SFAS~~EITF No. ~~153,~~~~Exchanges~~05-06,Determining the Amortization Period for Leasehold Improvements. EITF No. 05-06 provides that the amortization period used for leasehold improvements acquired in a business combination or purchased after the inception of ~~Nonmonetary Assets — An Amendment~~a lease be the shorter of ~~APB Opinion No. 29, Accounting for Nonmonetary Transactions. SFAS No. 153 eliminates~~(a) the ~~exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29,~~~~Accounting for Nonmonetary Transactions~~~~, and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows~~useful life of the ~~entity~~assets or (b) a term that includes required lease periods and renewals that are ~~expected to change significantly as~~reasonably assured upon the acquisition or the purchase. The provisions of EITF No. 05-06 are effective on a ~~result~~prospective basis for leasehold improvements purchased or acquired. We adopted EITF No. 05-06 during the second quarter of ~~the exchange. SFAS No. 153 is effective for~~ fiscal ~~periods beginning after June 15, 2005. We do~~2006 and it did not ~~expect the adoption of SFAS 153 to~~ have a material impact on our consolidated financial position, results of operations or cash flows.

In ~~December 2004,~~November 2005, the FASB issued ~~Statement~~Staff Position, or FSP, FAS115-1/124-1,The Meaning of ~~Financial~~ Other-Than-Temporary Impairment and Its Application to Certain Investments, which addresses the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. This FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in this FSP amends SFAS No. 115,Accounting ~~Standards~~for Certain Investments in Debt and Equity Securities, and SFAS No. ~~123(R)~~124,Accounting for Certain Investments Held by Not-for-Profit Organizations, and APB Opinion No. 18,The Equity Method of Accounting for Investments in Common Stock. We will adopt this FSP during the first quarter of fiscal 2007. We do not believe the adoption of this FSP will have a material impact on our consolidated financial position, results of operations or cash flows.

In November 2005, the FASB issued FSP FAS123(R)-3,Transition Election to Accounting for the Tax Effects of Share-Based Payment Awards.This FSP requires an entity to follow either the transition guidance for the additional-paid-in-capital pool as prescribed in SFAS No. 123(R),Share-Based Payment, ~~which requires~~or the ~~measurement and recognition of compensation expense for all stock-based compensation payments.~~alternative transition method as described in the FSP. An entity that adopts SFAS No. 123(R) isusing the modified prospective application may make a one-time election to adopt the transition method described in this FSP. An entity may take up to one year from the later of its initial adoption of SFAS No. 123(R) or the effective ~~for all interim~~date of this FSP to evaluate its available transition alternatives and ~~annual periods beginning after June 15,~~make its one-time election. This FSP became effective in November 2005. We are currently evaluating the impact that the adoption of ~~SFAS No. 123(R)~~this FSP could have on our ~~operating results and~~consolidated financial ~~condition.The adoption of the SFAS No. 123(R) fair value method will have a significant impact on our reported~~position, results of operations although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because that will depend on the fair value and number of share-based payments granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the magnitude of the impact of that standard would have approximated the impact ofStatement of Financial Accounting Standards No. 123,~~Accounting for Stock-Based Compensation,~~ assuming the application of the Black-Scholes model as described in the disclosure of pro forma net income (loss) and pro forma net income (loss) per share inNote 1 of the Notes to the Consolidated Financial Statements under the subheading “Stock-Based Compensation.” SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financingor cash ~~flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption.~~flows.

~~Business Risks~~ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to the risks discussed in “Item 1. Business” and "Management's Discussion and Analysis of Financial Condition and Results of Operations," our business is subject to the risks set forth below.

~~Risks Related to Our Operations~~Interest Rate Risk

Inventory purchases are based upon future demand forecasts, which may not accurately predict the quantity or type of our products that our customers will want in the future. In forecasting demand, we must make multiple assumptions which may prove to be incorrect. If there were to be a sudden and significant decrease in demand for our products, or if there were a higher incidence of inventory obsolescence because of rapidly changing technology and customer requirements, we could be required to write-down our inventory and our gross margin could be adversely affected. Additionally, if we fail to estimate customer demand properly before a new product is introduced, we may end up with excess inventory levels of older products, which could result in write-downs of the value of our inventory and our gross margin could be adversely affected. During the second quarter of fiscal 2005, demand for our non PCI Express mainstream desktop products declined significantly due in large part to unexpected competitive pricing actions taken by our competition. As a result of these competitive pricing actions, we were required to reduce the average selling prices of certain of our mainstream desktop products and our gross margin was adversely affected. If such competitive pricing actions were to recur in the future, we could be forced to continue to reduce average selling prices or to write-down our inventory and our gross margin could be adversely affected. Conversely, if we underestimate our customers’ demand for our products, we may have inadequate manufacturing capability and may not be able to obtain sufficient inventory to fill our customers’ orders on a timely basis. Even if we are able to increase production levels to meet customer demand, we may not be able to do so in a cost effective manner. Inability to fill our customers' orders on a timely basis could damage our customer relationships, result in lost revenue, cause a loss in market share or damage our reputation.

~~We order materials in advance of anticipated customer demand. Therefore, we have limited ability to reduce our inventory purchase commitments quickly in response to any revenue shortfalls.~~

Substantially all of our sales are made on the basis of purchase orders rather than long-term agreements. As a result, we may commit resources to the production of products without having received advance purchase commitments from customers. Any inability to sell products to which we have devoted significant resources could harm our business. In addition, cancellation or deferral of product orders could result in our holding excess inventory, which could adversely affect our gross margin and restrict our ability to fund operations. We may build inventories during periods of anticipated growth and in connection with selling workstation boards directly to major original equipment manufacturers, or OEMs. Additionally, because we typically recognize a substantial portion of our revenue in the last month of each quarter, we may not be able to reduce our inventory purchase commitments in a timely manner in response to any revenue shortfalls. We could be subject to excess or obsolete inventories and be required to take corresponding inventory write-downs if growth slows or if we incorrectly forecast product demand. A reduction in demand could negatively impact our gross margin and financial results.

~~We are dependent on key personnel and the loss of these employees could negatively impact our business.~~

Our performance is substantially dependent on the performance of our executive officers and key employees. None of our officers or employees is bound by an employment agreement, meaning our relationships with our officers and employees are at will. We do not have "key person" life insurance policies on any of our employees. The loss of the services of any of our executive officers, technical personnel or other key employees, particularly Jen-Hsun Huang, our President and Chief Executive Officer, would harm our business. Our success will depend on our ability to identify, hire, train and retain highly qualified technical and managerial personnel. Our failure to attract and retain the necessary technical and managerial personnel would harm our business. The integration of new executives or personnel could disrupt our ongoing operations.

~~Failure to achieve expected manufacturing yields for existing and/or new products would reduce our gross margin.~~

Semiconductor manufacturing yields are a function both of product design, which is developed largely by us, and process technology, which typically is proprietary to the manufacturer. Since low yields may result from either design or process technology failures, yield problems may not be effectively determined or resolved until an actual product exists that can be analyzed and tested to identify process sensitivities relating to the design rules that are used. As a result, yield problems may not be identified until well into the production process. Resolution of yield problems would require cooperation by and communication between us and the manufacturer.

Because of our potentially limited access to wafer fabrication capacity from our manufacturers, any decrease in manufacturing yields could result in an increase in our per unit costs and force us to allocate our available product supply among our customers. This could potentially harm customer relationships, our reputation, our revenue and our gross profit. Our wafer manufacturers may be unable to achieve or maintain acceptable manufacturing yields in the future. Our inability to achieve planned yields from our wafer manufacturers could harm our business. We also face the risk of product recalls or product returns resulting from design or manufacturing defects that are not discovered during the manufacturing and testing process. A significant number of product returns due to a defect or recall, could damage our reputation and result in customers working with our competitors.

~~To stay competitive, we may have to invest more resources in research and development.~~

If new competitors, technological advances by existing competitors or other competitive factors require us to invest significantly greater resources than anticipated in research and development efforts, our operating expenses would increase. We have substantially increased our engineering and technical resources and have 1,231 full-time employees engaged in research and development as of January 30, 2005, compared to 1,057 employees as of January 25, 2004. During fiscal 2005, 2004 and 2003, research and development expenditures represented 17%, 15% and 12% as a percentage of revenue, respectively. If we are required to invest significantly greater resources than anticipated in research and development efforts without an increase in revenue, our operating results would decline. We anticipate that we will continue to devote substantial resources to research and development, and we expect these expenses to increase in absolute dollars in the foreseeable future due to the increased complexity and the greater number of products under development. Research and development expenses are likely to fluctuate from time to time to the extent we make periodic incremental investments in research and development and these investments may be independent of our level of revenue.

~~Our operating expenses are relatively fixed and we may have limited ability to reduce operating expenses quickly in response to any revenue shortfalls.~~

During fiscal 2005 and 2004, our operating expenses, which are comprised of research and development expenses and sales, general and administrative expenses, represented 27% and 24% of our total revenue, respectively. Since we typically recognize a substantial portion of our revenue in the last month of each quarter, we may not be able to adjust our operating expenses in a timely manner in response to any revenue shortfalls. If we are unable to reduce operating expenses quickly in response to any revenue shortfalls it would negatively impact our financial results.

~~Failure to transition to new manufacturing process technologies could affect our ability to compete effectively.~~

Our strategy is to utilize the most advanced manufacturing process technology appropriate for our products and available from commercial third-party foundries. Use of advanced processes may have greater risk of initial yield problems and higher product cost. Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development. We continuously evaluate the benefits of migrating to smaller geometry process technologies in order to improve performance and reduce costs. We currently use 0.15 micron, 0.14 micron, 0.13 micron and 0.11 micron process technologies for our family of GPUs, MCPs and WMPs. The majority of our newest GPUs, the GeForce 6 series, GeForce FX and the GeForce FX Go products are manufactured in 0.13 micron and 0.11 micron process technology.

We have experienced difficulty in migrating to new manufacturing processes in the past and, consequently, have suffered reduced yields, delays in product deliveries and increased expense levels. We may face similar difficulties, delays and expenses as we continue to transition our products to smaller geometry processes. Moreover, we are dependent on our relationships with our third-party manufacturers to migrate to smaller geometry processes successfully. The inability by us or our third-party manufacturers to transition to new manufacturing process technologies may adversely affect our operating results and negatively impact our gross margin.

~~Our operating results are unpredictable and may fluctuate, and if our operating results are below the expectations of securities analysts or investors, our stock price could decline.~~

Many of our revenue components fluctuate and are difficult to predict, and our operating expenses are largely independent of revenue in any particular period. It is, therefore, difficult for us to accurately forecast revenue and profits or losses. As a result, it is possible that in some quarters our operating results could be below the expectations of securities analysts or investors, which could cause the trading price of our common stock to decline, perhaps substantially. For example, on August 5, 2004, we announced that the operating results for our second quarter of fiscal 2005 included significantly lower amounts of revenue and earnings per share than had been expected by securities analysts. Our announcement was followed by a decline in the trading price of our common stock. Conversely, on February 17, 2005, we announced better than expected financial results for the fourth quarter of fiscal 2005. This announcement was followed by an increase in the price of our common stock. We believe that our quarterly and annual results of operations may continue to be affected by a variety of factors that could harm our revenue, gross profit and results of operations.

~~Factors that have affected our results of operations in the past, and could affect our results of operations in the future, include the following:~~

·	~~demand and market acceptance for our products and/or our customers’ products;~~

·	~~the successful development and volume production of our next-generation products;~~

·	~~new product announcements or product introductions by our competitors;~~

·	~~our ability to introduce new products in accordance with OEMs’ design requirements and design cycles;~~

·	~~changes in the timing of product orders due to unexpected delays in the introduction of our customers’ products;~~

·	~~the level of growth or decline of the PC industry in general;~~

·	~~slower than expected growth of demand for new technologies;~~

·	~~fluctuations in the availability of manufacturing capacity or manufacturing yields;~~

·	~~declines in spending by corporations and consumers related to perceptions regarding an economic downturn in the United States and international economies;~~

·	~~competitive pressures resulting in lower than expected average selling prices;~~

·	~~product rates of return in excess of that forecasted or expected due to quality issues;~~

·	~~the rescheduling or cancellation of customer orders;~~

·	~~the loss of a key customer or the termination of a strategic relationship;~~

·	~~seasonal fluctuations associated with the PC and consumer products market;~~

·	~~substantial disruption in our suppliers’ operations, as a result of a natural disaster, equipment failure, terrorism or other causes;~~

·	~~supply constraints for and changes in the cost of the other components incorporated into our customers’ products, including memory devices;~~

·	~~our inability to reduce the manufacturing costs of our products;~~

·	~~legal and other costs related to defending intellectual property and other types of lawsuits;~~

·	~~availability of licenses at commercially reasonable terms for the continued sale or development of new products;~~

·	~~customer receivable bad debt write-offs;~~

·	~~costs associated with the repair and replacement of defective products;~~

·	~~unexpected inventory write-downs; and~~

·	~~introductions of enabling technologies to keep pace with faster generations of processors and controllers.~~

Any one or more of the factors discussed above could prevent us from achieving our expected future revenue or net income. Accordingly, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of future performance. In addition, the results of any quarterly period are not necessarily indicative of results to be expected for a full fiscal year.

~~Risks Related to Our Products~~

~~We need to develop new products and to manage product transitions in order to succeed.~~

Our business depends to a significant extent on our ability to successfully develop new products for our target segments. Our add-in board and motherboard manufacturers, original design manufacturers, or ODMs, and major OEM customers typically introduce new system configurations as often as twice per year, typically based on spring and fall design cycles. Accordingly, when our customers are making their design decisions, our existing products must have competitive performance levels or we must timely introduce new products in order to be included in new system configurations. This requires that we do the following:

·	~~anticipate the features and functionality that consumers will demand;~~

·	~~incorporate those features and functionalities into products that meet the exacting design requirements of OEMs, ODMs, CEMs and add-in board and motherboard manufacturers;~~

·	~~price our products competitively; and~~

·	~~introduce the products to the market within the limited window for OEMs, ODMs and add-in board and motherboard manufacturers.~~

If ODMs and OEMs do not include our products in their systems, they will typically not use our products in their design systems until at least the next design configuration. Therefore, we endeavor to develop close relationships with our OEMs and ODMs in an attempt to allow us to better anticipate and address customer needs in new products.

As a result, we believe that significant expenditures for research and development will continue to be required in the future. We make these expenditures independent of the level of purchase commitments from our customers. If our new products are not adopted by our customers, our business results may be adversely affected. The success of new product introductions will depend on many factors, including the following:

·	~~proper new product definition;~~

·	~~timely completion and introduction of new product designs;~~

·	~~the ability of IBM, TSMC, UMC, Chartered and any additional third-party manufacturers to effectively manufacture our new products in a timely manner;~~

·	~~dependence on third-party subcontractors for assembly, testing and packaging of our products and in meeting product delivery schedules and maintaining product quality;~~

·	~~the quality of any new products;~~

·	~~differentiation of new products from those of our competitors;~~

·	~~market acceptance of our products and our customers' products; and~~

·	~~availability of adequate quantity and configurations of various types of memory products.~~

A critical component of our product development effort is our partnerships with leaders in the computer aided design, or CAD, industry. We have invested significant resources to develop relationships with industry leaders, including Cadence Design Systems, Inc. and Synopsys, Inc., often assisting these companies in the product definition of their new products. We believe that forming these relationships and utilizing next-generation development tools to design, simulate and verify our products will help us remain at the forefront of the 3D graphics, communications and networking markets and develop products that utilize leading-edge technology on a rapid basis. We believe this approach assists us in meeting the new design schedules of PC OEMs and cellular phone manufacturers. If these relationships are not successful, we may not be able to develop new products in a timely manner, which could result in a loss of market share, a decrease in revenue and a negative impact on our operating results.

In addition, our strategy includes utilizing the most advanced semiconductor process technology appropriate for our products and available from commercial third-party foundries. Use of advanced processes has in the past resulted in initial yield problems. New products that we introduce may not incorporate the features and functionality demanded by OEMs, ODMs, add-in board and motherboard manufacturers and consumers of PCs and consumer electronics. Even if we are able to provide the demanded features and functionality, we may not be able to successfully develop or introduce new products in sufficient volumes within the appropriate time to meet both the OEMs’ design cycles and market demand. We have in the past experienced delays in the development of some new products. Our failure to successfully develop, introduce or achieve market acceptance for new digital media processors would harm our business. In particular, during the first half of fiscal 2004, we experienced delays in the introduction of digital media processors using our next generation technology. In addition, we expected to ramp up sales of our PCI Express products during the second quarter of fiscal 2005, but as a result of Intel’s delayed PCI Express chipset production, followed by their product recall, the performance desktop segment was impacted by stalling our customers’ production ramp of our GeForce PCX GPUs. Any such delay in the future or failure of our digital media processors or other processors to meet or exceed specifications of competitive products could materially harm our business.

~~Our failure to identify new market or product opportunities or develop new products could harm our business.~~

As our digital media processors develop and competition increases, we anticipate that product life cycles at the high end will remain short and average selling prices will continue to decline. In particular, we expect average selling prices and gross margins for our digital media processors to decline as each product matures and as unit volume increases. As a result, we will need to introduce new products and enhancements to existing products to maintain overall average selling prices and gross margins. In order for our digital media processors to achieve high volumes, leading PC OEMs, ODMs, and add-in board and motherboard manufacturers must select our digital media processor for design into their products, and then successfully complete the designs of their products and sell them. We may be unable to successfully identify new product opportunities or to develop and bring to market new products in a timely fashion. In addition, we cannot guarantee that new products we develop will be selected for design into PC OEMs’, ODMs’, and add-in board and motherboard manufacturers’ products, that any new designs will be successfully completed or that any new products will be sold. As the complexity of our products and the manufacturing process for our products increases, there is an increasing risk that we will experience problems with the performance of our products and that there will be delays in the development, introduction or volume shipment of our products. We may experience difficulties related to the production of current or future products or other factors that may delay the introduction or volume sale of new products we develop. In addition, we may be unable to successfully manage the production transition risks with respect to future products. Failure to achieve any of the foregoing with respect to future products or product enhancements could result in rapidly declining average selling prices, reduced margins and reduced demand for products or loss of market share. In addition, technologies developed by others may render our digital media processors non-competitive or obsolete or result in our holding excess inventory, any of which would harm our business.

~~PCI Express is central to our GPU as well as MCP strategies and the outcome of this strategy will impact our business.~~

PCI Express is expected to enable a new level of performance for high bandwidth applications like graphics and networking. The transition to PCI Express, which is extremely complex, is central to our GPU and MCP objectives this fiscal year. We initiated this transition by creating our GeForce PCX series of GPUs, using HSI technology. During the second quarter of fiscal 2005, we executed on our strategy to deliver a full line of GPUs ready to support PCI Express chipsets. We expected to ramp up sales of our PCI Express products during the second quarter of fiscal 2005, but as a result of Intel’s delayed PCI Express chipset production, followed by their product recall, the performance desktop segment was impacted by stalling our customers’ production ramp of our GeForce PCX GPUs. During the third quarter of fiscal 2005, we announced and ramped up sales of the GeForce 6600 GT, GeForce 6600 and the GeForce 6200, our first native PCI Express GPUs. In May 2004, we announced the Mobile PCI Express Module Specification, or MXM. MXM was jointly developed by NVIDIA and leading notebook PC manufacturers in an effort to accelerate the adoption of PCI Express-based notebooks in all market segments. MXM is an open design specification that supports a wide range of graphics solutions from most GPU manufacturers, allowing system integrators maximum flexibility for build-to-order with various graphics solutions. MXM also serves as the primary delivery vehicle for our GeForce Go 6 series of GPUs.

Industry adoption of PCI Express was slower than we expected during fiscal 2005 and there is no assurance that the adoption rate will increase during fiscal 2006. If our PCI Express compatible products do not meet consumer and/or customer demand or expectations, our business results could suffer.

~~We could suffer a loss of market share if our products contain significant defects.~~

Products as complex as those we offer may contain defects or experience failures when introduced or when new versions or enhancements to existing products are released. We have in the past discovered defects and incompatibilities with customers’ hardware in certain of our products and may experience delays or loss of revenue to correct any new defects or incompatibilities in the future. Errors in new products or releases after commencement of commercial shipments could result in loss of market share, failure to achieve market acceptance, or loss of design wins. Our products typically go through only one verification cycle prior to beginning volume production and distribution. As a result, our products may contain defects or flaws that are undetected prior to volume production and distribution. If these defects or flaws exist and are not detected prior to volume production and distribution, we may be required to reimburse customers for costs to repair or replace the affected products in the field. We may also be required to incur additional research and development costs to find and correct the defect, which could divert the attention of our management and engineers from the development of new products. These costs could be significant and could adversely affect our business and operating results. We may also suffer a loss of reputation and/or a loss in our market share, either of which could materially harm our financial results.

~~Risks Related to Our Partners~~

~~We sell our products to a small number of customers and our business could suffer by the loss of these customers.~~

We have only a limited number of customers and our sales are highly concentrated. Although a small number of our customers represent the majority of our revenue, their end customers include a large number of OEMs and system integrators throughout the world. Our sales process involves achieving key design wins with leading PC OEMs and major system builders and supporting the product design into high volume production with key CEMs, ODMs, motherboard and add-in board manufacturers. These design wins in turn influence the retail and system builder channel that is serviced by CEMs, ODMs, motherboard and add-in board manufacturers. Our distribution strategy is to work with a small number of leading independent CEMs, ODMs, motherboard manufacturers, add-in board manufacturers and distributors, each of which has relationships with a broad range of system builders and leading PC OEMs. Currently, we sell a significant majority of our digital media processors directly to distributors, CEMs, ODMs, motherboard and add-in board manufacturers, which then sell boards with our graphics processor to leading PC OEMs, retail outlets and to a large number of system builders. If we were to lose sales to our PC OEMs, CEMs, ODMs, motherboard and add-in board manufacturers and were unable to replace the lost sales with sales to different customers, or if they were to significantly reduce the number of products they order from us, our revenue may not reach or exceed the expected level in any period, which could harm our financial condition and our results of operations.

~~Difficulties in collecting accounts receivable could result in significant charges against income, which could harm our business.~~

Our accounts receivable are highly concentrated and make us vulnerable to adverse changes in our customers' businesses and to downturns in the economy and the industry. In addition, difficulties in collecting accounts receivable or the loss of any significant customer could materially and adversely affect our financial condition and results of operations. Accounts receivable owed by foreign customers may be difficult to collect. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. As of the end of fiscal 2005, fiscal 2004 and fiscal 2003 our allowance for doubtful accounts represented 0.1%, 0.1% and 0.2% of revenue for each fiscal quarter, respectively. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required which could adversely affect our operating results. We may have to record additional reserves or write-offs in the future, which could negatively impact our financial results.

~~We depend on foundries and independent contractors to manufacture our products and these third parties may not be able to satisfy our manufacturing requirements, which would harm our business.~~

We do not manufacture the semiconductor wafers used for our products and do not own or operate a wafer fabrication facility. Our products require wafers manufactured with state-of-the-art fabrication equipment and techniques. We utilize TSMC, IBM, UMC and Chartered to produce our semiconductor wafers and utilize independent subcontractors to perform assembly, testing and packaging. Our wafer requirements represent a significant portion of the total production capacity at IBM. We depend on these suppliers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields, and to deliver those products to us on a timely basis at acceptable prices. These manufacturers may be unable to meet our near-term or long-term manufacturing or pricing requirements. We obtain manufacturing services on a purchase order basis. The foundries we use have no obligation to provide us with any specified minimum quantities of product. TSMC, IBM, UMC and Chartered fabricate wafers for other companies, including certain of our competitors, and could choose to prioritize capacity for other users, reduce or eliminate deliveries to us, or increase the prices that they charge us on short notice. If we are unable to meet customer demand due to reduced or eliminated deliveries, we could lose sales to customers, which would negatively impact our revenue and our reputation. Because the lead-time needed to establish a strategic relationship with a new manufacturing partner could be several quarters, there is no readily available alternative source of supply for any specific product. In addition, the time and expense to qualify a new foundry could result in additional expense, diversion of resources or lost sales any of which would negatively impact our financial results. We believe that long-term market acceptance for our products will depend on reliable relationships with TSMC, IBM, UMC, Chartered and any other manufacturers we may use to ensure adequate product supply and competitive pricing to respond to customer demand. Any difficulties like these would harm our business.

~~We are dependent on third parties located outside of the United States for assembly, testing and packaging of our products, which reduces our control over the delivery and quantity of our products.~~

Our digital media processors are assembled and tested by Siliconware Precision Industries Company Ltd., Amkor Technology Inc., STATS ChipPAC Incorporated and Advanced Semiconductor Engineering, Inc., all of which are located outside of the United States. We do not have long-term agreements with any of these subcontractors. As a result of our dependence on third-party subcontractors for assembly, testing and packaging of our products, we do not directly control product delivery schedules or product quality. Any product shortages, quality assurance problems or political instability outside of the United States could increase the costs of manufacture, assembly or testing of our products, which could cause our gross margin to decline. Due to the amount of time typically required to qualify assemblers and testers, we could experience significant delays in the shipment of our products if we are required to find alternative third parties to assemble or test our products or components. Any such delays could result in a loss of reputation or a decrease in sales to our customers.

~~We rely on third-party vendors to supply tools to us for the development of our new products and we may be unable to obtain the tools necessary to develop these products.~~

In the design and development of new products and product enhancements, we rely on third-party software development tools. While we currently are not dependent on any one vendor for the supply of these tools, some or all of these tools may not be readily available in the future. For example, we have experienced delays in the introduction of products in the past as a result of the inability of then available software development tools to fully simulate the complex features and functionalities of our products. The design requirements necessary to meet consumer demands for more features and greater functionality from digital media processors in the future may exceed the capabilities of the software development tools that are available to us. If the software development tools we use become unavailable or fail to produce designs that meet consumer demands, our business could suffer.

~~We may not be able to realize the potential financial or strategic benefits of business acquisitions, which could hurt our ability to grow our business, develop new products and sell our products.~~

In the past we have acquired and invested in other businesses that offered products, services and technologies that we believed would help expand or enhance our products and services or help expand our distribution channels. We may enter into future acquisitions of, or investments in, businesses, in order to complement or expand our current businesses or enter into a new business segment. If we do consider an acquisition, strategic alliance or joint venture, the negotiations could divert management’s attention as well as other resources. For any previous or future acquisition or investment, the following risks could impair our ability to grow our business and develop new products, and ultimately, could impair our ability to sell our products and may not lead to any improvements in our financial results:

·	~~difficulty in combining the technology, products, operations or workforce of the acquired business with our business;~~

·	~~disruption of our ongoing businesses;~~

·	~~difficulty in realizing the potential financial or strategic benefits of the transaction;~~

·	~~diversion of management’s attention from our business;~~

·	~~difficulty in maintaining uniform standards, controls, procedures and policies;~~

·	~~disruption of or delays in ongoing research and development efforts;~~

·	~~diversion of capital and other resources;~~

·	~~assumption of liabilities;~~

·	~~difficulties in entering into new markets in which we have limited or no experience and where competitors in such market segments have stronger positions; and~~

·	~~impairment of relationships with employees and customers, or the loss of key employees as a result of any integration of new businesses and management personnel.~~

In addition, the consideration for any future acquisition could be paid in cash, shares of our common stock, the issuance of convertible debt securities or a combination of cash, convertible debt and common stock. If we pay a portion of the purchase price in cash, our cash reserves would be reduced. If the consideration is paid with shares of our common stock, or convertible debentures, the holdings of existing stockholders would be further diluted. We cannot forecast the number, timing or size of future acquisitions, or the effect that any such acquisitions might have on our operations or financial results.

The impact on our future revenue by Microsoft’s announcement that it has entered into an agreement with one of our competitors to develop technology for future Xbox products and services is uncertain.

During fiscal 2004, Microsoft announced that it had entered into an agreement with one of our competitors to develop technology for future Xbox products and services. The impact that this announcement may have on our future revenue from Microsoft is uncertain, but we anticipate that we will not achieve historical levels of Xbox revenue in fiscal 2006. Revenue from Microsoft during fiscal 2005, fiscal 2004 and fiscal 2003 accounted for 13%, 15% and 23% respectively, of our total revenue. If our revenue from Microsoft declines during fiscal 2006, we will need to increase revenue from other customers in order to be able to maintain our current revenue level and operating results. If we do not replace any reduction in revenue from Microsoft with revenue from other customers, our operating results would be adversely affected.

~~Provisions in our certificate of incorporation, our bylaws and our agreement with Microsoft could delay or prevent a change in control.~~

·	~~the ability of the board of directors to create and issue preferred stock without prior stockholder approval;~~

·	~~the prohibition of stockholder action by written consent;~~

·	~~a classified board of directors; and~~

·	~~advance notice requirements for director nominations and stockholder proposals.~~

On March 5, 2000, we entered into an agreement with Microsoft in which we agreed to develop and sell graphics chips and to license certain technology to Microsoft and its licensees for use in the Xbox. In the event that an individual or corporation makes an offer to purchase shares equal to or greater than 30% of the outstanding shares of our common stock, Microsoft has first and last rights of refusal to purchase the stock. The Microsoft provision and the other factors listed above could also delay or prevent a change in control of NVIDIA.

~~Risks Related to Our Competition~~

~~The 3D graphics, platform processor and handheld industries are highly competitive and we may be unable to compete.~~

The market for GPUs, MCPs and WMPs for PCs and handhelds is intensely competitive and is characterized by rapid technological change, evolving industry standards and declining average selling prices. We believe that the principal competitive factors in this market are performance, breadth of product offerings, access to customers and distribution channels, backward-forward software support, conformity to industry standard Application Programming Interfaces, or APIs, manufacturing capabilities, price of digital media processors and total system costs of add-in boards and motherboards. We believe that our ability to remain competitive will depend on how well we are able to anticipate the features and functions that customers will demand and whether we are able to deliver consistent volumes of our products at acceptable levels of quality. We expect competition to increase both from existing competitors and new market entrants with products that may be less costly than ours, or may provide better performance or additional features not provided by our products, which could harm our business. Further, we expect substantial competition from Intel’s publicized focus on moving to selling platform solutions dominated by Intel products, such as the Centrino platform.

An additional significant source of competition is from companies that provide or intend to provide GPU and MCP solutions for the PC and WMP segments. Some of our competitors may have greater marketing, financial, distribution and manufacturing resources than we do and may be more able to adapt to customer or technological changes. Our current competitors include the following:

suppliers of MCPs that incorporate a combination of 3D graphics, networking, audio, communications and Input/Output, or I/O, functionality as part of their existing solutions, such as ATI, Broadcom, Intel, Silicon Integrated Systems, Inc. and VIA;

suppliers of standalone desktop GPUs that incorporate 3D graphics functionality as part of their existing solutions, such as ATI, Creative Technology, Matrox Electronics Systems Ltd. and XGI Technology, Inc.;

suppliers of standalone notebook GPUs that incorporate 3D graphics functionality as part of their existing solutions, such as ATI, Silicon Motion Corporation and the joint venture of a division of SONICblue Incorporated (formerly S3 Incorporated) and VIA; and

~~suppliers of WMPs for handheld devices that incorporate advanced graphics functionality as part of their existing solutions, such as ATI, Renesas Technology, Broadcom and Seiko-Epson.~~

If and to the extent we offer products outside of the PC, consumer electronics and handheld segments, we may face competition from some of our existing competitors as well as from companies with which we currently do not compete. We cannot accurately predict if we will compete successfully in any new markets we may enter. If we are unable to compete in our current and any new markets, our financial results will suffer.

~~Our failure to achieve one or more design wins would harm our business.~~

Our future success will depend in large part on achieving design wins, which entails having our existing and future products chosen for hardware components or subassemblies designed by PC OEMs, ODMs, and add-in board and motherboard manufacturers. Our add-in board and motherboard manufacturers and major OEM and ODM customers typically introduce new system configurations as often as twice per year, generally based on spring and fall design cycles. Accordingly, at the time our OEM and ODM customers are making their decisions, our existing products must have competitive performance levels or we must timely introduce new products with such performance characteristics, consistent quality, correct price and an adequate feature-set in order to be included in new system configurations. Our failure to achieve one or more design wins would harm our business. The process of being qualified for inclusion in an OEM’s product can be lengthy and could cause us to miss a cycle in the demand of end users for a particular product feature, which also could harm our business. Even if we achieve a significant number of design wins, there can be no assurance that our OEM and ODM customers will actually take the design to production or that the design will be commercially successful.

Our ability to achieve design wins also depends in part on our ability to identify and ensure compliance with evolving industry standards. Unanticipated changes in industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers, including Intel and Microsoft. Such changes would require us to invest significant time and resources to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industry standards for a significant period of time, our ability to achieve design wins could suffer. If we are unable to achieve new design wins for existing or new customers, we may lose market share and our operating results would be negatively impacted.

~~Risks Related to Market Conditions~~

~~We are dependent on the PC market and the rate of its growth has and may in the future have a negative impact on our business.~~

We derive the majority of our revenue from the sale of products for use in the desktop PC and notebook PC segments, including professional workstations. We expect to continue to derive most of our revenue from the sale or license of products for use in the desktop PC and notebook PC segments in the next several years. A reduction in sales of PCs, or a reduction in the growth rate of PC sales, will reduce demand for our products. Moreover, changes in demand could be large and sudden. Since PC manufacturers often build inventories during periods of anticipated growth, they may be left with excess inventories if growth slows or if they have incorrectly forecast product transitions. In these cases, PC manufacturers may abruptly suspend substantially all purchases of additional inventory from suppliers like us until the excess inventory has been absorbed.

If our products do not continue to be accepted by the PC and consumer electronics segments or if demand by the PC and consumer electronics segments for new and innovative products decreases, our business and operating results would suffer.

Our success depends in part upon continued broad adoption of our digital media processors for 3D graphics in PC and consumer electronics applications. The market for digital media processors has been characterized by unpredictable and sometimes rapid shifts in the popularity of products, often caused by the publication of competitive industry benchmark results, changes in dynamic random-access memory devices pricing and other changes in the total system cost of add-in boards, as well as by severe price competition and by frequent new technology and product introductions. Only a small number of products have achieved broad market acceptance and such market acceptance, if achieved, is difficult to sustain due to intense competition and frequent new technology and product introductions. Since the PC segment is our core business, our business would suffer if for any reason our current or future digital media processors do not continue to achieve widespread acceptance in the PC segment. If we are unable to complete the timely development of products or if we were unable to successfully and cost-effectively manufacture and deliver products that meet the requirements of the PC segment, we may experience a decrease in revenue which could negatively impact our operating results. Additionally, there can be no assurance that the industry will continue to demand new products with improved standards, features or performance. If our customers and the market do not continue to demand new products with increased performance, features, functionality or standards, sales of our products could decline and our business and operating results could suffer.

~~We are subject to risks associated with international operations which may harm our business.~~

A significant portion of our semiconductor wafers are manufactured, assembled, tested and packaged by third-parties located outside of the United States. Additionally, we generated 76% of our total revenue from sales to customers outside of the United States and other Americas for the fiscal 2005. Revenue from sales to customers outside of the United States and other Americas for fiscal 2004 and 2003 accounted for 75% and 68% of total revenue, respectively. The manufacture, assembly, test and packaging of our products outside of the United States and sales to these customers outside of the United States and other Americas subjects us to a number of risks associated with conducting business outside of the United States and other Americas, including, but not limited to:

·	~~international economic and political conditions;~~

·	~~unexpected changes in, or impositions of, legislative or regulatory requirements;~~

·	~~labor issues in foreign countries;~~

·	~~cultural differences in the conduct of business;~~

·	~~inadequate local infrastructure;~~

·	~~delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers and restrictions;~~

·	~~transportation delays;~~

·	~~longer payment cycles;~~

·	~~difficulty in collecting accounts receivable;~~

·	~~fluctuations in currency exchange rates;~~

·	~~imposition of additional taxes and penalties;~~

·	~~different legal standards with respect to protection of intellectual property;~~

·	~~the burdens of complying with a variety of foreign laws; and~~

·	~~other factors beyond our control, including terrorism, civil unrest, war and diseases such as severe acute respiratory syndrome, or SARS and Bird flu.~~

~~If sales to any of our customers outside of the United States and other Americas are delayed or cancelled because of any of the above factors, our revenue may be negatively impacted.~~

We also have sales offices in several international locations including Taiwan, Russia, Japan, China, Hong Kong, Germany, France and the United Kingdom. We have a design center in Germany and recently opened a design center in India. Our international operations are subject to the many of the risks contained in the above list. Difficulties with our international operations, including finding appropriate staffing, may divert management’s attention and other resources all of which could negatively impact our operating results.

~~Hostilities involving the United States and/or terrorist attacks could harm our business.~~

The financial, political, economic and other uncertainties following the terrorist attacks upon the United States led to a weakening of the global economy. Subsequent terrorist acts and/or the threat of future outbreak or continued escalation of hostilities involving the United States and Iraq or other countries could adversely affect the growth rate of our revenue and have an adverse effect on our business, financial condition or results of operations. In addition, any escalation in these events or similar future events may disrupt our operations or those of our customers, distributors and suppliers, which could also adversely affect our business, financial condition or results of operations.

~~Our business is cyclical in nature and an industry downturn could harm our financial results.~~

Our business is directly affected by market conditions in the highly cyclical semiconductor industry, including alternating periods of overcapacity and capacity constraints, variations in manufacturing costs and yields, significant expenditures for capital equipment and product development and rapid technological change. If we are unable to respond to changes in our industry, which can be unpredictable and rapid, in an efficient and timely manner, our operating results could suffer. In particular, from time to time, the semiconductor industry has experienced significant and sometimes prolonged downturns characterized by diminished product demand and accelerated erosion of average selling prices. If we cannot take appropriate actions such as reducing our costs to sufficiently offset declines in demand during a downturn, our revenue and earnings will suffer during downturns.

~~Political instability in Taiwan and in The People’s Republic of China or elsewhere could harm our business.~~

Because of our reliance on TSMC and UMC, our business may be harmed by political instability in Taiwan, including the worsening of the strained relations between The People’s Republic of China and Taiwan, or if relations between the United States and The People’s Republic of China are strained due to foreign relations events. If any of our suppliers experienced a substantial disruption in their operations, as a result of a natural disaster, political unrest, economic instability, acts of terrorism or war, equipment failure or other cause, could harm our business.

~~We are exposed to fluctuations in the market values of our portfolio investments and in interest rates.~~

We account for our investment instruments in accordance with SFAS No. 115. All of the cash equivalents and marketable securities are treated as "available-for-sale" under SFAS No. 115. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate debt securities may have their market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Part of our portfolio includes equity investments in publicly traded companies, the value of which are subject to market price volatility. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or if the decline in fair value of our publicly traded equity investments is judged to be other-than-temporary. We may suffer losses in principal if forced to sell securities that decline in market value due to changes in interest rates. However, because our debt securities are classified as "available-for-sale", no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity.

~~Our stock price may continue to experience significant short-term fluctuations.~~

The price of our common stock has fluctuated greatly. These price fluctuations have been rapid and severe. For example, on August 5, 2004, we announced that the operating results for our second quarter of fiscal 2005 included significantly lower amounts of revenue and earnings per share than had been expected by securities analysts. Our announcement was followed by a decline in the trading price of our common stock. Conversely, on February 17, 2005, we announced better than expected financial results for the fourth quarter of fiscal 2005. This announcement was followed by an increase in the price of our common stock. We believe that our quarterly and annual results of operations may continue to be affected by a variety of factors that could harm our revenue, gross profit and results of operations. The price of our common stock may continue to fluctuate greatly in the future due to factors that are non-company specific, such as the decline in the United States economy, acts of terror against the United States, war or due to a variety of company specific factors, including quarter to quarter variations in our operating results, shortfalls in revenue or earnings from levels expected by securities analysts and the other factors discussed in these risk factors.

~~Risks Related to Intellectual Property, Litigation and Government Action~~

~~While we believe that we currently have adequate internal controls over financial reporting, we are exposed to risks from recent legislation requiring companies to evaluate those internal controls.~~

Section 404 of the Sarbanes-Oxley Act of 2004 requires our management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control structure and procedures for financial reporting. We have an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements. This legislation is relatively new and neither companies nor accounting firms have significant experience in complying with its requirements. As a result, we have incurred, and expect to continue to incur increased expense and to devote additional management resources to Section 404 compliance. In the event that our chief executive officer, chief financial officer or our independent registered public accounting firm determine that our internal controls over financial reporting are not effective as defined under Section 404, investor perceptions of us may be adversely affected and could cause a decline in the market price of our stock.

~~Expensing employee stock options in future periods will materially and aversely affect our reported operating results.~~

Since inception, we have used stock options and our employee stock purchase program as fundamental components of our compensation packages. To date we generally have not recognized compensation cost for employee stock options or shares sold pursuant to our employee stock purchase program. We believe that these incentives directly motivate our employees and, through the use of vesting, encourage our employees to remain with us. In December 2004, the Financial Accounting Standards Board issued SFAS No. 123(R),~~Share-Based Payment~~, or SFAS No. 123(R). SFAS No. 123(R) is effective for interim or annual periods beginning after June 15, 2005, and requires that we record compensation expense for stock options and our employee stock purchase plan using the fair value of those awards. Expensing these incentives in future periods will materially and adversely affect our reported operating results as the stock-based compensation expense would be charged directly against our reported earnings. To the extent that SFAS No. 123(R) makes it more expensive to grant stock options or to continue to have an employee stock purchase program, we may decide to incur increased cash compensation costs. In addition, actions that we may take to reduce the non-cash expense may make it difficult to attract, retain and motivate employees any of which could adversely affect our competitive position as well as our business and operating results.

~~We are currently involved in patent litigation, which, if not resolved favorably, could require us to pay damages.~~

We are currently involved in patent litigation. On October 19, 2004, Opti Incorporated, or Opti, filed a complaint for patent infringement against us in the United States District Court for the Eastern District of Texas. Opti asserts that unspecified NVIDIA chipsets infringe five United States patents held by Opti. Opti seeks unspecified damages for our conduct, attorneys fees and triple damages because of our alleged willful infringement of these patents. Discovery has not begun and no trial date has been set. We believe the claims asserted against us are without merit and we will continue to defend ourselves vigorously.

In August 2004, a Texas limited partnership named American Video Graphics, LP, or AVG, filed three separate complaints for patent infringement against various corporate defendants (not including NVIDIA) in the United States District Court for the Eastern District of Texas. AVG initially asserted that each of the approximately thirty defendants sells products that infringe one or more of seven separate patents that AVG claims relate generally to graphics processing functionality. Each of the three lawsuits targeted a different group of defendants; one case involves approximately twenty of the leading personal computer manufacturers, the PC Makers Case, one case involves the three leading video game console makers, the Game Console Case, and one case involves approximately ten of the leading video game publishers, the Game Publishers Case. In November 2004, NVIDIA sought and was granted permission to intervene in two of the three pending AVG lawsuits, the PC Makers Case and the Game Console Case. NVIDIA’s complaint in intervention alleges both that the patents in suit are invalid and that, to the extent AVG’s claims target NVIDIA products, the asserted patents are not infringed. Two other leading suppliers of graphics processing products, Intel and ATI, have also intervened in the cases, ATI in both the PC Makers and Game Console Case, and Intel in the PC Makers Case.

After some consensual reconfigurations proposed by the various parties, in January 2005, the district court judge entered Docket Control and Discovery Orders in the three lawsuits. The PC Makers case now involves four separate patents and is currently scheduled for trial beginning on September 11, 2006. The Game Console Case involves a single patent and is currently scheduled for trial beginning on December 4, 2006. We believe that, to the extent AVG’s infringement allegations target functionality that may be performed by NVIDIA products, those claims are without merit, and we will continue to defend ourselves and our products vigorously.

Our defenses against these suits may be unsuccessful. At this time, we cannot reasonably estimate the range of any loss or damages resulting from these suits due to uncertainty regarding the ultimate outcome. If these cases go forward, we expect that they will result additional legal and other costs, regardless of the outcome, which could be substantial.

~~Our industry is characterized by vigorous protection and pursuit of intellectual property rights or positions that could result in litigation and substantial costs to us.~~

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights and positions, which have resulted in protracted and expensive litigation. The digital media processor industry in particular has been characterized recently by the aggressive pursuit of intellectual property positions, and we expect our competitors to continue to pursue aggressive intellectual property positions. The technology that we use to design and develop our products and that is incorporated into our products may be subject to claims that it infringes the patents or intellectual property rights of others. Our success is dependent on our ability to develop new products without infringing or misappropriating the intellectual property rights of others. From time to time we receive notices or are included in legal actions alleging that we have infringed patents or other intellectual property rights owned by third parties. We expect that, as the number of issued hardware and software patents increases, and as competition in our product lines intensifies, the volume of intellectual property infringement claims may increase. If infringement claims are made against us, we may seek licenses under the claimants’ patents or other intellectual property rights. However, licenses may not be offered to us at all or on terms acceptable to us, particularly by competitors. The failure to obtain a license from a third party for technology used by us could cause us to incur substantial liabilities and to suspend the manufacture of and sale of one or more products, which could reduce our revenue and harm our business. Furthermore, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights, which could be costly.

If we have to initiate a claim, our operating expenses may increase which could negatively impact our operating results. In order to develop products, we have licensed technology from third parties for incorporation in our digital media processors, and expect to continue to enter into license agreements with third parties for future products. These licenses may result in royalty payments to third parties, the cross licensing of technology by us or payment of other consideration. If these arrangements are not concluded on commercially reasonable terms or at all, our competitive position and our business could suffer.

We have agreed to indemnify certain customers for certain claims of infringement arising out of sale of our products. We may be involved in future lawsuits or other legal proceedings alleging patent infringement or other intellectual property rights violations by us or customers that we have agreed to indemnify for certain claims of infringement arising out of the sale of our products to these customers. In addition, litigation or other legal proceedings may be necessary to:

·	~~assert claims of infringement;~~

·	~~enforce our patents;~~

·	~~protect our trade secrets or know-how; or~~

·	~~determine the enforceability, scope and validity of the propriety rights of others.~~

Regardless of the outcome, litigation can be very costly and can divert management’s attention from other matters. We may be unsuccessful in defending or pursuing these lawsuits or claims. An unfavorable ruling could include significant damages, invalidation of a patent or group of patents, indemnification of customers, payment of lost profits, or, when it has been sought, injunctive relief. If one of our patents in invalidated or found to be unenforceable, we would be unable to license the patent which could result in a loss of revenue. We or our customers may be required to obtain a license to the other parties’ patents or intellectual property. If we fail to obtain a license from a third party for technology we use or that is used by an indemnified customer, we could be subject to substantial liabilities or have to suspend or discontinue the manufacture of and sale of one or more of our products either of which could reduce our revenue and harm our business. Initiation of claims or indemnification of a customer may increase our operating expenses which could negatively impact our operating results.

~~Our ability to compete will be harmed if we are unable to adequately protect our intellectual property.~~

We rely primarily on a combination of patents, trademarks, trade secrets, employee and third-party nondisclosure agreements and licensing arrangements to protect our intellectual property in the United States and internationally. We have numerous patents issued, allowed and pending in the United States and in foreign countries. Our patents and pending patent applications relate to technology used by us in connection with our products, including our digital media processors. We also rely on international treaties and organizations and foreign laws to protect our intellectual property. The laws of certain foreign countries in which our products are or may be manufactured or sold, including various countries in Asia, may not protect our products or intellectual property rights to the same extent as by the laws of the United States. This makes the possibility of piracy of our technology and products more likely. We continuously assess whether and where to seek formal protection for particular innovations and technologies based on such factors as: the commercial significance of our operations and our competitors’ operations in particular countries and regions; the location in which our products are manufactured; our strategic technology or product directions in different countries; and the degree to which intellectual property laws exist and are meaningfully enforced in different jurisdictions.

Our pending patent applications and any future applications may not be approved. In addition, any issued patents may not provide us with competitive advantages or may be challenged by third parties. The enforcement of patents by others may harm our ability to conduct our business. Others may independently develop substantially equivalent intellectual property or otherwise gain access to our trade secrets or intellectual property. Our failure to effectively protect our intellectual property could harm our business. We have licensed technology from third parties for incorporation in our digital media processors, and expect to continue to enter into license agreements for future products. These licenses may result in royalty payments to third parties, the cross licensing of technology by us or payment of other consideration. If these arrangements are not concluded on commercially reasonable terms, our business could suffer.

~~ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

~~Interest Rate Risk~~

We account for our investment instruments in accordance with Statement of Financial Accounting Standards No. 115, or SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securities. All of the cash equivalents and marketable securities are treated as ~~"available-for-sale"~~“available-for-sale” under SFAS No. 115. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our debt securities as ~~"available-for-sale,"~~“available-for-sale”, no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to ~~maturity.~~maturity or declines in fair value are determined to be other than temporary. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income, a component of stockholders’ equity, net of tax.

As of January ~~30, 2005,~~29, 2006, we performed a sensitivity analysis on our floating and fixed rate financial investments. According to our analysis, parallel shifts in the yield curve of both +/~~-50 basis points~~- 0.5% would result in changes in fair market values for these investments of approximately ~~$2.9~~$2.6 million.

Exchange Rate Risk

We consider our direct exposure to foreign exchange rate fluctuations to be minimal. Currently, sales and arrangements with third-party manufacturers provide for pricing and payment in United States dollars, and, therefore, are not subject to exchange rate fluctuations. Increases in the value of the United States’ dollar relative to other currencies would make our products more expensive, which could negatively impact our ability to compete. Conversely, decreases in the value of the United States’ dollar relative to other currencies could result in our suppliers raising their prices in order to continue doing business with us. To date, we have not engaged in any currency hedging activities, although we may do so in the future. Fluctuations in currency exchange rates could harm our business in the future.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is set forth in our ~~consolidated financial statements~~Consolidated Financial Statements and ~~notes~~Notes thereto included in this Annual ~~Report.~~

Report on Form 10-K/A.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Audit Committee Review into Past Option Grants and Practices and Restatement

In May 2006, following media reports of stock option accounting investigations at other companies, the management of NVIDIA decided to conduct a review of stock option grants made by NVIDIA. Management advised the Company’s Board of Directors of the review at a regularly-scheduled meeting of the Board of Directors on May 25, 2006. The Board of Directors directed management to report its findings to the Audit Committee. Management presented its findings to the Audit Committee in late June 2006. Following that presentation, the Audit Committee determined that it should perform its own independent review of stock option grants made by NVIDIA. The Audit Committee, with the assistance of outside legal counsel, began its review on approximately June 29, 2006.

The Audit Committee’s review was completed on November 13, 2006 when the Audit Committee reported its findings to the full Board of Directors. The review covered option grants to all employees, directors and consultants for all grant dates during the period from our initial public offering in January 1999 through June 2006. As part of its review, the Audit Committee determined whether the correct measurement dates had been used under applicable accounting principles for these options. The measurement date means the date on which the option is deemed granted under applicable accounting principles, namely Accounting Principles Board Opinion No. 25, or APB 25,Accounting for Stock Issued to Employees and related interpretations, and is the first date on which all of the following are known: (1) the individual employee who is entitled to receive the option grant, (2) the number of options that an individual employee is entitled to receive, and (3) the option’s exercise price.

Based on the findings of the Audit Committee and our internal review, we identified a number of occasions on which we used an incorrect measurement date for financial accounting and reporting purposes. These errors resulted primarily from our use during our fiscal year 2000, 2001 and 2002, of certain date selection methods discussed below which resulted in employees receiving options with stated exercise prices lower than the market prices as measured based upon the actual grant dates. We ceased using such practices beginning in our fiscal year 2003. The Audit Committee found that, beginning in our fiscal year 2003, we improved our stock option grant processes and have generally granted and priced our employee stock options in an objective and consistent manner since that time. However, for one Company-wide annual stock option grant we made in fiscal 2004, we did not finalize the number of options allocated to each employee as of the stated grant date in May 2003, which resulted in stock-based compensation charges due to the change in the measurement date to the date the grants were finalized. The Audit Committee’s review did not identify any additional stock-based compensation charges from measurement date issues subsequent to that fiscal year 2004 grant.

In accordance with APB 25, with respect to periods through January 29, 2006, we should have recorded stock-based compensation expense to the extent that the fair market value of our common stock on the correct measurement date exceeded the exercise price of each option granted. For periods commencing January 30, 2006 (the beginning of our fiscal year 2007), we record stock-based compensation expense in accordance with Statement of Financial Accounting Standards No. 123(R) (revised), or SFAS No. 123(R),Share-Based Payment.

As a result of the measurement date errors identified from the Audit Committee’s review, through January 29, 2006, we recorded aggregate non-cash stock-based compensation charges of $127.4 million, net of related tax effects. These charges were based primarily on APB 25 (intrinsic value-based) charges and associated payroll taxes of $199.6 million on a pre-tax basis, which are being amortized over the vesting term of the stock options in accordance with Financial Accounting Standards Board Interpretation No. 28, or FIN 28,Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans. We have amortized a substantial portion of these charges to expense during our fiscal years 2000 to 2006. If an option is forfeited prior to vesting, we reverse both the charges amortized to expense in prior periods as well as any remaining unamortized deferred stock-based compensation associated with the forfeited options. Accordingly, our net stock-based compensation charges amortized to our statement of income are lower than the aggregate stock-based compensation charges based on APB 25 (intrinsic-value based). As of January 29, 2006, the remaining APB 25 (intrinsic value-based) unamortized deferred stock-based compensation related to the errors identified during the review was approximately $3.0 million.

The types of errors we identified were as follows:

Improper Measurement Dates forCompany-Wide Annual or Retention Stock Option Grants. We determined that, in connection with certain annual or retention stock option grants that we made to employees during our fiscal years 2000, 2001, 2002, 2003 and 2004, the final number of shares that an individual employee was entitled to receive was not determined and/or the proper approval of the related stock option grant had not been given until after the stated grant date. Therefore, the measurement date for such options for accounting purposes was actually subsequent to the stated grant date, resulting in new measurement dates for the related options.

Improper Measurement Dates for Stock Option Grants during Fiscal Years 2001 and 2002. In connection with stock option grants that we made to newly-hired employees (and, to a much lesser degree, retention grants to existing employees) during fiscal years 2001 and 2002, our practice was to grant stock options with an exercise price based upon the lowest closing price of our common stock in the last few days of the month of hire or the last few days of any subsequent month in the quarter of hire. The selection of the grant date of the related option grants would be made at the end of the fiscal quarter and was based on achieving the lowest exercise price for the affected employees. As a result of these practices, the measurement date for such options for accounting purposes was actually subsequent to the stated grant date, resulting in new measurement dates for the related options.

Improper Measurement Dates for Stock Option Grants during Fiscal Year 2000. In connection with certain stock option grants to newly-hired employees (and, to a much lesser degree, retention grants to existing employees) during a portion of fiscal year 2000, our practice was to delay the selection of the related grant dates until the end of a two-month period in the fiscal quarter during which the employees who received the grants began their employment with NVIDIA. As a result of this practice, the exercise price of the related option grants was not determined until subsequent to the stated grant date. We also determined that, during fiscal year 2000, we generally set the grant date and exercise price of employee option grants for new hires and promotions at the lowest price of the last few business days of the month of their hire or promotion (or of the following month in certain two-month periods that were chosen for an indeterminate reason). As a result of these practices, the measurement date for such options for accounting purposes was actually subsequent to the stated grant date, resulting in new measurement dates for the related options. In addition, we also determined that the exercise price or the number of options to be granted had not been determined, or the proper approval had not been given, for various other miscellaneous option grants during fiscal year 2000 until after the stated grant date - resulting in new measurement dates for accounting purposes for the related options.

Other Issues Identified.We also identified instances where stock option grants did not comply with applicable terms and conditions of the stock plans from which the grants were issued. For example, two grants were made to officers of NVIDIA by the chief executive officer under delegated authority; however, under the terms of the applicable plan, the option grant should have been made by our Board or the Compensation Committee. There were also instances where (1) option grants were made to a small group of employees who joined NVIDIA pursuant to a business combination, and to a few other employees in certain instances, with stated exercise prices below the fair market value of our common stock on the actual measurement date of the related grants; and (2) option grants were made to a few individuals who were contractors rather than employees, without recording the appropriate accounting charges. The accounting impact of these items was cumulatively less than $6.0 million. In addition, the Audit Committee did not find any evidence that these violations were committed for improper purposes.

The Audit Committee carefully considered the involvement of current members of management in the option grant process and concluded that the evidence did not give rise to any concern about the integrity of any current officer or director of NVIDIA. The Audit Committee also found that the accounting errors and improper practices brought to light during their review were not motivated by any intent to mislead investors, improve NVIDIA’s reported financial results, or obtain any personal benefit. Based on its findings, the Audit Committee was unable to reach any conclusion regarding the integrity of former officers and employees.

As a result of the errors we identified, we have restated our historical financial statements from our fiscal year 2000 through our fiscal year 2006 to record $127.4 million of charges related to stock-based compensation and associated payroll tax expense, net of related income tax effects. These errors resulted in after-tax charges of $1.4 million, $11.7 million and $25.8 million for our fiscal years 2006, 2005 and 2004, respectively. Additionally, the cumulative effect of the related after-tax charges for periods prior to our fiscal year ended January 25, 2004 was $88.4 million. These additional stock-based compensation expense charges were non-cash and had no impact on our reported revenue, cash, cash equivalents or marketable securities for each of the restated periods.

For all periods through the end of our fiscal year 2006, we have recorded aggregate non-cash stock-based compensation charges of $190.2 million, associated payroll tax charges of $9.4 million and a related income tax benefit of $72.2 million.

We recorded an income tax benefit of $2.0 million, $6.7 million, and $14.6 million for our fiscal years 2006, 2005 and 2004, respectively. The cumulative income tax benefit for periods prior to our fiscal year 2004 was $48.9 million. The income tax benefit differs from the expected statutory federal tax benefit principally as a result of state income tax benefits and federal and state research and experimental tax credits not previously benefited on stock-based compensation charges. Additionally, in our fiscal year 2004, we released a valuation allowance of $3.2 million recognized in prior periods on the incremental stock-based compensation expense. Prior to our fiscal year 2004, it was not more likely than not that we would realize the benefits of the future deductible amounts related to stock-based compensation expense. In our fiscal year 2004, the realization of these amounts became more likely than not due to settlement of certain tax contingencies related to stock-based compensation expense.

As part of this restatement, we also accrued liabilities and recorded charges to operating costs and expenses for certain payroll tax contingencies related to the incremental stock-based compensation expense in the amount of $18.8 million for all annual periods from our fiscal year 2000 through our fiscal year 2006. We recorded such charges in the amount of $3.1 million, $1.3 million, and $1.6 million for our fiscal years 2006, 2005 and 2004, respectively. Upon expiration of the related statute of limitations, we also recorded benefits from the reversal of previously-recorded payroll tax liabilities of $6.6 million and $2.8 million in our fiscal years 2006 and 2005, respectively. As a result, the net benefit to our statements of income was $3.5 million and $1.5 million for our fiscal years 2006 and 2005, respectively. The cumulative payroll tax expense for periods prior to our fiscal year 2004 was $12.8 million. For those stock option grants that we determined to have incorrect measurement dates for accounting purposes and that we had originally issued as incentive stock options, or ISOs, we recorded a liability for payroll tax contingencies in the event such grants would not be respected as ISOs under the principles of the Internal Revenue Code, or IRC, and the regulations thereunder. These liabilities were recorded with a charge to operating costs and expenses.

We also considered the application of Section 409A of the IRC to certain stock option grants where, under APB 25, intrinsic value existed at the time of grant. In the event such stock options grants are not respected as issued at fair market value at the original grant date under principles of the IRC and the regulations thereunder and are subject to Section 409A, we are considering potential remedial actions that may be available. We do not expect to incur a material charge as a result of any such potential remedial actions.

As a result of the findings of the Audit Committee, we concluded that we needed to amend our Original Filing to restate our consolidated financial statements for the years ended January 29, 2006, January 30, 2005, and January 25, 2004 and the related disclosures.

Management’s Conclusion Regarding the Effectiveness of Internal Control over Stock Option Grant Practices

In assessing whether our disclosure controls and procedures and our internal control over financial reporting were effective as of January 29, 2006, management considered, among other things, the impact of the restatement of the financial statements for fiscal years 2004, 2005, and 2006, the nature of the restatement as disclosed in Note 2 of the Notes to Consolidated Financial Statements, and the effectiveness of internal control in this area as of January 29, 2006.

Management’s Consideration of the Restatement

In coming to the conclusion that our disclosure controls and procedures and our internal control over financial reporting were effective as of January 29, 2006, management considered, among other things, the control deficiencies related to accounting for stock based compensation and the control environment. Management also considered the conclusions of the Audit Committee, following an extensive review of our past and current stock option grants and practices, that: (a) while NVIDIA used incorrect accounting measurement dates for certain stock option grants, as more fully discussed above, those errors were not a result of fraud; and (b) our option grant practices had improved significantly since May 2003. These control deficiencies resulted in the need to restate our previously-issued financial statements as disclosed in Note 2, “Restatement of Consolidated Financial Statements, Audit Committee and Company Findings”, of the Notes to our Consolidated Financial Statements. Management has concluded that the control deficiencies that resulted in the restatement of the previously-issued financial statements did not constitute a material weakness as of January 29, 2006 because management determined that as of January 29, 2006 there were effective controls designed and in place to prevent or detect a material misstatement and, therefore, the likelihood of our financial statements being materially misstated is remote.

Specifically, during our fiscal years 2003 through 2006, NVIDIA implemented new policies and processes to provide greater internal controls over our stock option grant approvals, including:

enhanced processes surrounding Company-wide annual and semi-annual grants, especially pertaining to advanced planning, approval timelines, documentation, and communication;

improved procedures related to the administration of option grants related to newly-hired employees;

hiring of additional qualified personnel in the areas of financial accounting and reporting as well as legal;

documentation and testing of key controls in the area of stock administration, including controls based in processes driven by our human resource department;

review and approval by the Compensation Committee of our stock option grant guidelines and policies;

timely approval of stock option grants by the Compensation Committee;

enhanced focus on the establishment of guidelines in order to achieve a high level of objectivity in the determination of stock option grants made to all employees; and

increased review of our stock option grant plans and approval processes and documentation by our legal counsel

Management has concluded, therefore, that the control deficiencies that resulted in the restatement of the previously issued financial statements did not constitute a material weakness as of January 29, 2006.

Audit Committee’s Recommended Further Measures Regarding Stock Option Grants

The Audit Committee noted that management had significantly improved our stock option grant practices since May 2003. However, the Audit Committee recommended, and the Board of Directors approved, the following best practices, which we intend to adopt, for consideration in light of its review into our past stock option grant processes:

establish pre-determined grant dates for all stock option grants made by NVIDIA;

the Compensation Committee should establish stock option grant budgets and guidelines on no less than an annual basis, to be reviewed on a semi-annual basis;

the Compensation Committee should be provided with enhanced support to ensure that its monitoring of the compliance by the Company with the Compensation Committee’s guidelines, the applicable stock plan terms and conditions, and the related accounting for stock option grants;

our management should report quarterly to the Audit Committee regarding our stock option grant practices, including compliance with internal procedures, proper accounting principles, and applicable disclosure requirements;

we should improve documentation of option grant approvals and approved grants should be promptly entered into our financial records and stock option database; and

our stock administration personnel should continue to receive regular training.

Controls and Procedures

Disclosure Controls and Procedures

Based on their evaluation as of January ~~30, 2005,~~29, 2006, our management, including our Chief Executive Officer and Chief Financial Officer, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or the Exchange Act) were effective to ensure that the material information required to be disclosed by us in this Annual Report on Form ~~10-K~~10-K/A was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and instructions for Form 10-K.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of January ~~30, 2005~~29, 2006 based on the criteria set forth inInternal Control - Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the criteria set forth inInternal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of January ~~30, 2005.~~29, 2006.

Our management’s assessment of the effectiveness of our internal control over financial reporting as of January ~~30, 2005~~29, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within ~~our Company~~NVIDIA have been detected.

ITEM 9B.

OTHER INFORMATION

None.

~~ITEM 9B. OTHER INFORMATION~~

~~None.~~

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Identification of Directors

Reference is made to the information regarding directors appearing under the heading “Election of Directors” in our ~~2005~~2006 Proxy Statement, which information is hereby incorporated by reference.

Identification of Executive Officers

Reference is made to the information regarding executive officers appearing under the heading “Executive Officers of the Registrant” in Part I of this Annual Report on Form ~~10-K,~~10-K/A, which information is hereby incorporated by reference.

Identification of Audit Committee and Financial Expert

Reference is made to the information regarding directors appearing under the heading “Report of the Audit Committee of the Board of Directors” in our ~~2005~~2006 Proxy Statement, which information is hereby incorporated by reference.

Material Changes to Procedures for Recommending Directors

Compliance with Section 16(a) of the Exchange Act

Reference is made to the information appearing under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in our ~~2005~~2006 Proxy Statement, which information is hereby incorporated by reference.

Code of Ethics

Reference is made to the information appearing under the heading “Code of Ethics” in our ~~2005~~2006 Proxy Statement, which information is hereby incorporated by reference.

The full text of our “Worldwide Code of Ethics” and “Financial Team Code of Ethics” are published on our Investor Relations web site, under Corporate Governance, atwww.nvidia.com.

ITEM 11. EXECUTIVE COMPENSATION

Reference is made to the information appearing under the heading “Executive Compensation” in our ~~2005~~2006 Proxy Statement, which information is hereby incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Ownership of NVIDIA Securities

Reference is made to the information appearing in our ~~2005~~2006 Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” ~~and “Equity Compensation Plan Information,”~~, which information is hereby incorporated by reference.

Equity Compensation Plan Information

Information regarding our equity compensation plans, including both stockholder approved plans and non-stockholder approved plans, will be contained in our definitive Proxy Statement with respect to our Annual Meeting of Stockholders under the caption "Compensation-Equity Compensation Plan Information", and is incorporated by reference into this report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reference is made to the information appearing in our ~~2005~~2006 Proxy Statement under the heading “Certain ~~Transactions,”~~Transactions”, which information is hereby incorporated by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Reference is made to the information appearing in our ~~2005~~2006 Proxy Statement, which information is hereby incorporated by reference.

PART IV

~~ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES~~

ITEM 15.			~~Page~~EXHIBITS, FINANCIAL STATEMENT SCHEDULES

~~(a)~~	1.	~~Consolidated Financial Statements~~
		~~Report of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP~~	49
		~~Report of Independent Registered Public Accounting Firm, KPMG LLP~~	51
		~~Consolidated Balance Sheets as of January 30, 2005 and January 25, 2004~~	52
		~~Consolidated Statements of Income for the years ended January 30, 2005, January 25, 2004 and January 26, 2003~~	53
		~~Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended January 30, 2005, January 25, 2004 and January 26, 2003~~	54
		~~Consolidated Statements of Cash Flows for the years ended January 30, 2005, January 25, 2004 and January 26, 2003~~	55
		~~Notes to Consolidated Financial Statements~~	57

~~(a)~~	2.	~~Financial Statement Schedules~~
		~~Schedule II Valuation and Qualifying Accounts~~	84

~~(a)~~	3.	~~Exhibits~~
		~~The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as a part of this Annual Report.~~


			Page
(a)	1.	Consolidated Financial Statements

		Report of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP	65

		Report of Independent Registered Public Accounting Firm, KPMG LLP	67

		Consolidated Balance Sheets as of January 29, 2006, and January 30, 2005, as restated	68

		Consolidated Statements of Income for the years ended January 29, 2006, January 30, 2005, and January 25, 2004, as restated	69

		Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended January 29, 2006, January 30, 2005, and January 25, 2004, as restated	70

		Consolidated Statements of Cash Flows for the years January 29, 2006, January 30, 2005, and January 25, 2004, as restated	71

		Notes to Consolidated Financial Statements	73

(a)	2.	Financial Statement Schedules

		Schedule II Valuation and Qualifying Accounts	106

(a)	3.	Exhibits	107

		The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as a part of this Annual Report on Form 10-K/A.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

NVIDIA Corporation:

We have completed an integrated ~~audit~~audits of NVIDIA Corporation’s fiscal 2006 and 2005 consolidated financial statements and of its internal control over financial reporting as of January ~~30, 2005~~29, 2006 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our ~~audit,~~audits, are presented below.

Consolidated f~~inancial~~financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of NVIDIA Corporation and its subsidiaries at January 29, 2006 and January 30, 2005 and the results of their operations and their cash flows for each of the ~~year then~~two years in the period ended January 29, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein as of January 29, 2006 and January 30, 2005 and for each of the two years in the period ended January 29, 2006 when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our ~~audit.~~audits. We conducted our ~~audit~~audits of these statements in accordance with the standards of ~~thePublic~~the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our ~~audit provides~~audits provide a reasonable basis for our opinion.

As described in Note 2 to the consolidated financial statements, the Company has restated its fiscal 2006 and fiscal 2005 consolidated financial statements.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as ~~ofJanuary 30, 2005based~~of January 29, 2006 based on criteria established inInternal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as ~~ofJanuary 30, 2005,~~of January 29, 2006, based ~~oncriteria~~on criteria established inInternal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

San Jose, California

March ~~22, 2005~~

16, 2006, except with respect to our opinion on the consolidated financial statements insofar as it relates to the restatement discussed in Note 2, as to which the date is November 28, 2006.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

NVIDIA Corporation:

We have audited the accompanying ~~consolidated balance sheet of NVIDIA Corporation and subsidiaries (the “Company”), as of January 25, 2004, and the related~~ consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows of NVIDIA Corporation and subsidiaries (the Company) for ~~each of~~ the ~~years in the two-year period~~year ended January 25, 2004. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule for the ~~two years~~year ended January 25, 2004 as listed in the index of Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our ~~audits.~~

audit.

We conducted our ~~audits~~audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material ~~misstatement~~misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the ~~consolidated~~ financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our ~~audits provide~~audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the ~~financial position~~results of operations and cash flows of NVIDIA Corporation and subsidiaries ~~as of January 25, 2004, and~~for the ~~results of its operations and their cash flows for each of the years in the two-year period~~year ended January 25, 2004 in conformity with ~~accounting principles~~U.S. generally accepted ~~in the United States of America.~~accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As described in Note 2 to the accompanying consolidated financial statements, the consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows of NVIDIA Corporation and subsidiaries for the year ended January 25, 2004 have been restated.

/s/

KPMG LLP

Mountain View, California

February 12, 2004,

except as to Note 2, which is as of November 28, 2006.

NVIDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

January 30,

January 25,

2005

2004

ASSETS

Current assets:
Cash and cash equivalents $ 208,512 $ 214,422
Marketable securities 461,533 389,621
Accounts receivable, less allowances of $13,153 and $11,731 in 2005 and 2004, respectively 296,279 196,631
Inventories 315,518 234,238
Prepaid expenses and other current assets 19,819 14,539
Deferred income taxes 3,265 3,261
Total current assets 1,304,926 1,052,712

Property and equipment, net 178,955 190,029
Deposits and other assets 9,034 7,731
Goodwill 108,107 108,909
Intangible assets, net 27,514 39,963
$ 1,628,536 $ 1,399,344

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable $ 238,223 $ 185,342
Accrued liabilities 182,077 144,755
Current portion of capital lease obligations 856 4,015
Total current liabilities 421,156 334,112

Deferred income tax liabilities 20,754 8,609
Capital lease obligations, less current portion -- 856
Long-term liabilities 8,358 4,582
Commitments and contingent liabilities - see Note 12

Stockholders’ equity:
Common stock, $.001 par value; 1,000,000,000 shares authorized; 169,173,898 shares issued and 167,089,545 outstanding in 2005; and 164,145,787 shares issued and outstanding in 2004 169 164
Additional paid-in capital 636,618 583,481
Deferred compensation (2,926 ) (5,468 )
Treasury stock (24,644 ) --
Accumulated other comprehensive income (loss), net (3,463 ) 850
Retained earnings 572,514 472,158
Total stockholders' equity $ 1,178,268 1,051,185
$ 1,628,536 $ 1,399,344


	January 29, 2006			January 30, 2005
	(As Restated)(1)			(As Restated)(1)
ASSETS
Current assets:
Cash and cash equivalents	$	551,756		$	208,512
Marketable securities		398,418			461,533
Accounts receivable, less allowances of $10,837 and $13,153 in 2006 and 2005, respectively		318,186			296,279
Inventories		254,870			315,786
Prepaid expenses and other current assets		24,387			19,819
Deferred income taxes		2,682			4,977

Total current assets		1,550,299			1,306,906
Property and equipment, net		178,152			178,955
Deposits and other assets		27,477			9,034
Goodwill		145,317			108,107
Intangible assets, net		15,421			27,514
Deferred income taxes, non-current		38,021			33,035

	$	1,954,687		$	1,663,551

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	179,395		$	238,223
Accrued liabilities		259,264			182,077
Current portion of capital lease obligations		—			856

Total current liabilities		438,659			421,156
Other long-term liabilities		20,036			21,304
Commitments and contingencies - see Note 12
Stockholders’ equity:
Preferred stock, $.001 par value; 2,000,000 shares authorized; none issued		—			—
Common stock, $.001 par value; 1,000,000,000 shares authorized; 179,963,979 shares issued and 171,477,456 outstanding in 2006; and 169,173,898 shares issued and 167,089,545 outstanding in 2005		180			169
Additional paid-in capital		965,784			816,051
Deferred compensation		(3,604	)		(13,577	)
Treasury stock		(212,142	)		(24,644	)
Accumulated other comprehensive loss, net		(1,957	)		(3,463	)
Retained earnings		747,731			446,555

Total stockholders' equity		1,495,992			1,221,091

	$	1,954,687		$	1,663,551

(1)	See Note 2, “Restatement of Consolidated Financial Statements, Audit Committee and Company Findings”, of the Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

Year Ended

Year Ended

Year Ended

January 30,

January 25,

January 26,

2005

2004

2003

Revenue $ 2,010,033 $ 1,822,945 $ 1,909,447
Cost of revenue 1,360,547 1,294,067 1,327,271
Cost of revenue related to stock option exchange (1) -- -- 6,164
Gross profit 649,486 528,878 576,012
Operating expenses:
Research and development 335,104 269,972 224,873
Sales, general and administrative 200,789 165,249 151,485
In-process research and development -- 3,500 --
Stock option exchange (1) -- -- 55,668
Total operating expenses 535,893 438,721 432,026
Income from operations 113,593 90,157 143,986
Interest income 11,422 18,561 23,246
Interest expense (164 ) (12,010 ) (16,467 )
Other income (expense), net 594 3,033 (208 )
Convertible debenture redemption expense -- (13,068 ) --
Income before income tax expense 125,445 86,673 150,557
Income tax expense 25,089 12,254 59,758
Net income 100,356 $ 74,419 $ 90,799
Basic net income per share $ 0.60 $ 0.46 $ 0.59
Diluted net income per share $ 0.57 $ 0.43 $ 0.54
Shares used in basic per share computation 166,062 160,924 153,513
Shares used in diluted per share computation 176,558 172,707 168,393

(1) The $61,832 stock option exchange expense for the year ended January 26, 2003 relates to personnel associated with cost of revenue (for manufacturing personnel), research and development and sales, general and administrative of $6,164, $35,417 and $20,251, respectively.


	Year Ended January 29, 2006			Year Ended January 30, 2005			Year Ended January 25, 2004
	(As Restated)(1)			(As Restated)(1)			(As Restated)(1)
Revenue	$	2,375,687		$	2,010,033		$	1,822,945
Cost of revenue		1,465,654			1,362,478			1,297,684

Gross profit		910,033			647,555			525,261
Operating expenses:
Research and development		357,123			348,220			292,162
Sales, general and administrative		202,088			204,159			179,811
In-process research and development		—			—			3,500
Settlement costs		14,158			—			—

Total operating expenses		573,369			552,379			475,473

Income from operations		336,664			95,176			49,788

Interest income		20,698			11,422			18,561
Interest expense		(72	)		(164	)		(12,010	)
Other income (expense), net		(502	)		594			3,033
Convertible debenture redemption expense		—			—			(13,068	)

Income before income tax expense (benefit)		356,788			107,028			46,304
Income tax expense (benefit)		55,612			18,413			(2,326	)

Net income	$	301,176		$	88,615		$	48,630

Basic net income per share	$	1.77		$	0.53		$	0.30

Diluted net income per share	$	1.65		$	0.50		$	0.28

Shares used in basic per share computation		169,690			166,062			160,924
Shares used in diluted per share computation		182,852			175,812			172,054

(1)	See Note 2, “Restatement of Consolidated Financial Statements, Audit Committee and Company Findings”, of the Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

AND

COMPREHENSIVE INCOME

(In thousands, except share data)

Accumulated
Other   Total
Additional   Deferred   Compre- Total Stock-   Compre-

Common Stock
Paid in Compen-   Treasury   hensive Retained holders’ hensive

Shares

Amount

Capital

sation

Stock

Income (Loss)

Earnings

Equity

Income

Balances, January 27, 2002 149,553,130 $ 150 $ 456,621 -- -- $ 108 $ 306,940 $ 763,819
Issuance of common stock from stock plans 4,421,823 4 25,483 -- -- -- -- 25,487
Stock option exchange offer 3,815,069 4 39,902 -- -- -- -- 39,906
Tax benefit from stock plans -- -- 9,180 -- -- -- -- 9,180
Deferred compensation -- -- -- (156 ) -- -- -- (156 )
Unrealized gain -- -- -- -- -- 5,742 -- 5,742 5,742
Tax effect of unrealized gain -- -- -- -- -- (2,297 ) -- (2,297 ) (2,297 )
Cumulative translation adjustments -- -- -- -- -- 207 -- 207 207
Net income -- -- -- -- -- -- 90,799 90,799 90,799
Balances, January 26, 2003 157,790,022 158 531,186 (156 ) -- 3,760 397,739 932,687 94,451
Issuance of common stock from stock plans 6,355,765 6 37,667 -- -- -- -- 37,673
Tax benefit from stock plans -- -- 8,488 -- -- -- -- 8,488
Deferred compensation -- -- 6,140 (5,984 ) -- -- -- 156
Amortization of deferred compensation -- -- -- 672 -- -- -- 672
Unrealized loss -- -- -- -- -- (4,850 ) -- (4,850 ) (4,850 )
Tax effect of unrealized loss -- -- -- -- -- 1,940 -- 1,940 1,940
Reclassification adjustment for net gains included in net income -- -- -- -- -- -- -- -- (3,159 )
Tax effect of reclassification adjustment for net gains included in net income -- -- -- -- -- -- -- -- 632
Net income -- -- -- -- -- -- 74,419 74,419 74,419
Balances, January 25, 2004 164,145,787 164 583,481 (5,468 ) -- 850 472,158 1,051,185 68,982
Issuance of common stock from stock plans 5,028,111 5 42,497 -- -- -- -- 42,502
Stock repurchase (2,084,353 ) -- -- -- (24,644 ) -- -- (24,644 )
Tax benefit from stock plans -- -- 11,845 -- -- -- -- 11,845
Deferred compensation -- -- (1,205 ) 1,205 -- -- -- --
Amortization of deferred compensation -- -- -- 1,337 -- -- -- 1,337
Unrealized loss -- -- -- -- -- (5,938 ) -- (5,938 ) (5,938 )
Tax effect of unrealized loss -- -- -- -- -- 1,470 -- 1,470 1,470
Reclassification adjustment for net losses included in net income -- -- -- -- -- 193 -- 193 193
Tax effect of reclassification adjustment for net losses included in net income -- -- -- -- -- (38 ) -- (38 ) (38 )
Net income -- -- -- -- -- -- 100,356 100,356 100,356
Balances, January 30, 2005 167,089,545 $ 169 $ 636,618 $ (2,926 ) $ (24,644 ) $ (3,463 ) $ 572,514 $ 1,178,268 $ 96,043


	Common Stock				Additional Paid-in Capital (As restated)(1)			Deferred Compensation (As restated)(1)			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (As restated)(1)			Total Stockholders’ Equity (As restated)(1)			Total Comprehensive Income (As restated)(1)
	Shares		Amount		Additional Paid-in Capital (As restated)(1)			Deferred Compensation (As restated)(1)			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (As restated)(1)			Total Stockholders’ Equity (As restated)(1)			Total Comprehensive Income (As restated)(1)
Balances, January 26, 2003	157,790,022		$	158	$	531,186		$	(156	)	$	—		$	3,760		$	397,739		$	932,687		$	94,451
Cumulative effect of restatement (Note 2)	—			—		134,119			(17,444	)		—			—			(88,429	)		28,246			(88,429	)
Issuance of common stock from stock plans	6,355,765			6		37,667			—			—			—			—			37,673
Tax benefit from stock plans	—			—		5,508			—			—			—			—			5,508
Deferred compensation	—			—		63,339			(63,183	)		—			—			—			156
Reversal of deferred compensation	—			—		(1,833	)		1,833			—			—			—			—
Amortization of deferred compensation	—			—		456			39,047			—			—			—			39,503
Unrealized loss, net of $1,940 tax effect	—			—		—			—			—			(383	)		—			(383	)		(383	)
Reclassification adjustment for net gains included in net income, net of $632 tax effect	—			—		—			—			—			(2,527	)		—			(2,527	)		(2,527	)
Net income	—			—		—			—			—			—			48,630			48,630			48,630

Balances, January 25, 2004	164,145,787			164		770,442			(39,903	)		—			850			357,940			1,089,493			45,720
Issuance of common stock from stock plans	5,028,111			5		42,497			—			—			—			—			42,502
Stock repurchase	(2,084,353	)		—		—			—			(24,644	)		—			—			(24,644	)
Tax benefit from stock plans	—			—		8,616			—			—			—			—			8,616
Reversal of deferred compensation	—			—		(5,359	)		5,359			—			—			—			—
Amortization of deferred compensation	—			—		(145	)		20,967			—			—			—			20,822
Unrealized loss, net of $1,470 tax effect	—			—		—			—			—			(4,468	)		—			(4,468	)		(4,468	)
Reclassification adjustment for net losses included in net income, net of ($38) tax effect	—			—		—			—			—			155			—			155			155
Net income	—			—		—			—			—			—			88,615			88,615			88,615

Balances, January 30, 2005	167,089,545			169		816,051			(13,577	)		(24,644	)		(3,463	)		446,555			1,221,091			84,302
Issuance of common stock from stock plans	10,831,746			11		127,486			—			—			—			—			127,497
Stock repurchase	(6,402,170	)		—		—			—			(188,509	)		—			—			(188,509	)
Tax benefit from stock plans	—			—		24,868			—			—			—			—			24,868
Cancellation of shares	(41,665	)		—		(520	)		—			1,011			—			—			491
Reversal of deferred compensation	—			—		(2,101	)		2,101			—			—			—			—
Amortization of deferred compensation	—			—		—			7,872			—			—			—			7,872
Unrealized loss, net of $845 tax effect	—			—		—			—			—			(120	)		—			(120	)		(120	)
Reclassification adjustment for net losses included in net income, net of ($407) tax effect	—			—		—			—			—			1,626			—			1,626			1,626
Net income	—			—		—			—			—			—			301,176			301,176			301,176

Balances, January 29, 2006	171,477,456		$	180	$	965,784		$	(3,604	)	$	(212,142	)	$	(1,957	)	$	747,731		$	1,495,992		$	302,682

(1)	See Note 2, “Restatement of Consolidated Financial Statements, Audit Committee and Company Findings” of the Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended
Year Ended
Year Ended

January 30,
January 25,
January 26,

2005
2004
2003
Cash flows from operating activities:
Net income $100,356 $74,419 $90,799
Adjustments to reconcile net income to net cash provided by operating activities:
In-process research and development -- 3,500 --
Non-cash realized gain on investment exchange (533) -- --
Depreciation and amortization 102,597 82,016 58,216
Net loss on retirements of property and equipment 412 -- --
Write-off of convertible debenture issuance costs -- 5,485 --
Deferred income taxes 12,141 55,135 29,768
Stock-based compensation 1,337 672 (156)
Issuance of common stock in exchange for stock options -- -- 39,906
Bad debt expense (844) 731 1,917
Tax benefit from employee stock plans 11,845 8,488 9,180
Changes in operating assets and liabilities:
Accounts receivable (110,312) (88,222) (20,867)
Inventories (81,280) (85,126) 68,831
Prepaid income taxes -- -- 38,016
Prepaid expenses and other current assets (5,569) (2,698) (4,315)
Deposits and other assets (1,458) (3,482) 63
Accounts payable 52,941 43,506 (72,890)
Accrued liabilities 50,567 (44,746) 26,564
Net cash provided by operating activities 132,200 49,678 265,032
Cash flows from investing activities:
Purchases of marketable securities (313,760) (734,642) (639,500)
Sales and maturities of marketable securities 229,068 1,021,590 422,200
Acquisition of businesses -- (71,303) (3,901)
Purchases of property and equipment and intangible assets (67,261) (127,604) (63,123)
Release of restricted cash -- -- 7,000
Net cash provided by (used in) investing activities (151,953) 88,041 (277,324)
Cash flows from financing activities:
Redemption of convertible debenture -- (300,000) --
Common stock issued under employee stock plans 42,502 37,757 25,487
Stock repurchase (24,644) -- --
Sale lease back financing -- -- 5,734
Principal payments on capital leases (4,015) (8,048) (4,935)
Net cash provided by (used in) financing activities 13,843 (270,291) 26,286
Change in cash and cash equivalents (5,910) (132,572) 13,994
Cash and cash equivalents at beginning of period 214,422 346,994 333,000
Cash and cash equivalents at end of period $208,512 $214,422 $346,994

Supplemental disclosures of cash flow information:
Cash paid for interest $163 $15,167 $15,100
Cash paid (refund) for income taxes, net $763 $(211) $(35,101)


	Year Ended
	January 29, 2006			January 30, 2005			January 25, 2004
	(As Restated)(1)			(As Restated)(1)			(As Restated)(1)
Cash flows from operating activities:
Net income	$	301,176		$	88,615		$	48,630
Adjustments to reconcile net income to net cash provided by operating activities:
In-process research and development		—			—			3,500
Non-cash realized gain on investment exchange		(96	)		(533	)		—
Depreciation and amortization		97,977			102,597			81,944
Net loss on retirements of property and equipment		1,005			412			—
Write-off of convertible debenture issuance costs		—			—			5,485
Deferred income taxes		(2,691	)		8,694			43,536
Stock-based compensation		7,872			20,822			39,503
Bad debt expense (benefit)		(492	)		(844	)		731
Tax benefit from employee stock plans		24,868			8,616			5,508
Changes in operating assets and liabilities:
Accounts receivable		(21,415	)		(110,312	)		(88,222	)
Inventories		60,916			(80,906	)		(85,131	)
Prepaid expenses and other current assets		(4,568	)		(5,569	)		(2,698	)
Deposits and other assets		(8,073	)		(1,458	)		(3,482	)
Accounts payable		(58,828	)		52,941			43,506
Accrued liabilities		48,757			49,125			(43,132	)

Net cash provided by operating activities		446,408			132,200			49,678

Cash flows from investing activities:
Purchases of marketable securities		(338,058	)		(313,760	)		(734,642	)
Sales and maturities of marketable securities		397,686			229,068			1,021,590
Acquisition of businesses		(12,131	)		—			(71,303	)
Purchases of property and equipment and intangible assets		(79,600	)		(67,261	)		(127,604	)
Investments in non-affiliates		(9,684	)		—			—

Net cash provided by (used in) investing activities		(41,787	)		(151,953	)		88,041

Cash flows from financing activities:
Redemption of convertible debenture		—			—			(300,000	)
Common stock issued under employee stock plans		127,497			42,502			37,757
Stock repurchase		(188,509	)		(24,644	)		—
Principal payments on capital leases		(856	)		(4,015	)		(8,048	)
Retirement of common stock		491			—			—

Net cash provided by (used in) financing activities		(61,377	)		13,843			(270,291	)

Change in cash and cash equivalents		343,244			(5,910	)		(132,572	)
Cash and cash equivalents at beginning of period		208,512			214,422			346,994

Cash and cash equivalents at end of period	$	551,756		$	208,512		$	214,422

Supplemental disclosures of cash flow information:
Cash paid for interest	$	12		$	163		$	15,167

Cash paid (refund) for income taxes, net	$	3,368		$	763		$	(211	)

NVIDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)

(In thousands)

Other non-cash activities:
Acquisition of business - goodwill adjustment ($1,091 ) $ -- $ --
Assets recorded under capital lease arrangements $ -- $ 2,528 $ --
Application of customer advance to accounts receivable $ (11,508 ) $ (46,866 ) $ (11,797 )
Marketable security received from investment exchange $ 688 $ -- $ --
Asset retirement obligation $ 4,483 $ -- $ --
Unrealized gains (losses) from marketable securities $ (5,745 ) $ (4,850 ) $ 5,742
Deferred stock-based compensation $ (1,205 ) $ 6,140 $ --


	Year Ended
	January 29, 2006			January 30, 2005			January 25, 2004
	(As Restated)(1)			(As Restated)(1)			(As Restated)(1)
Other non-cash activities:
Acquisition of business - goodwill adjustment	$	25,765		$	1,091		$	—

Assets recorded under capital lease arrangements	$	—		$	—		$	2,528

Application of customer advance to accounts receivable	$	—		$	11,508		$	46,866

Marketable security received from investment exchange	$	96		$	688		$	—

Asset retirement obligation	$	1,835		$	4,483		$	—

Unrealized gains/losses from marketable securities	$	1,068		$	5,745		$	4,850

Deferred stock-based compensation	$	(2,101	)	$	(5,359	)	$	61,506

(1)	See Note 2, “Restatement of Consolidated Financial Statements, Audit Committee and Company Findings”, of the Notes to Consolidated Financial Statements.

See accompanying notes to consolidated financial statements.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and Summary of Significant Accounting Policies

Our Company

NVIDIA Corporation is athe worldwide leader in programmable graphics ~~and digital media processors dedicated to creating~~processor technologies. Our products ~~that~~ enhance the ~~interactive~~end-user experience on consumer and professional computing ~~platforms.~~devices. We ~~design, develop and market~~have four major product-line operating segments: graphics processing units, or GPUs, media and communications processors, or MCPs, ~~wireless media processors, or WMPs~~Handheld GPUs, and ~~related software.~~Consumer Electronics. Our GPU Business is composed of products ~~are integral to a wide variety of visual computing platforms, including enterprise~~that support desktop personal computers, or PCs, ~~consumer~~notebook PCs and professional ~~workstations, notebook PCs,~~workstations; our MCP Business is composed of NVIDIA nForce products that operate as a single-chip or chipset that can off-load system functions, such as audio processing and network communications, and perform these operations independently from the host central processing unit, or CPU; our Handheld GPU Business is composed of products that support handheld personal digital assistants, cellular phones and other handheld devices; and our Consumer Electronics Business is concentrated in products that support video game consoles and other digital consumer electronics devices and is composed of our contractual arrangements with Sony Computer Entertainment, or SCE, to jointly develop a custom GPU incorporating our next-generation GeForce GPU and SCE’s system solutions in SCE’s PlayStation3, sales of our Xbox-related products, revenue from our license agreement with Microsoft relating to the successor product to their initial Xbox gaming console, the Xbox360, and related devices, and digital media ~~centers.~~processor products. We were incorporated in California in April 1993 and reincorporated in Delaware in April 1998. Our ~~objective is to be one of the most important and influential technology companies~~headquarter facilities are in ~~the world.~~

Santa Clara, California.

Fiscal year

We operate on a 52 or 53-week year, ending on the Sunday nearest January 31. Fiscal 2006 and 2004 were 52-week years, compared to fiscal 2005 which was a 53-week ~~year, compared to fiscal 2004 which was a 52-week~~ year. ~~The fourth quarter of fiscal 2005 was a 14-week quarter, compared to the fourth quarter of fiscal 2004 which was a 13-week quarter.~~

Reclassifications

~~Reclassifications~~

Certain prior fiscal year balances were reclassified to conform to the current fiscal year presentation.

Principles of Consolidation

Our consolidated financial statements include the accounts of NVIDIA Corporation and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, accounts receivable, inventories, income taxes and contingencies. These estimates are based on historical facts and various other assumptions that we believe are reasonable.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents. As of January ~~30, 2005,~~29, 2006, our cash and cash equivalents were ~~$208.5~~$551.8 million, which includes ~~$164.4~~$256.6 million invested in money market funds.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Marketable Securities

We account for our investment instruments in accordance with Statement of Financial Accounting Standards No. 115, or SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securities. All of our cash equivalents and marketable securities are treated as “available-for-sale” under SFAS No. 115. Cash equivalents consist of financial instruments which are readily convertible into cash and have original maturities of three ~~monthsor~~months or less at the time of acquisition. Marketable securities consist primarily of highly liquid investments with a maturity of greater than three months when ~~purchased. Part of our portfolio includes~~purchased and some equity ~~investments in publicly traded companies.~~investments. We classify our marketable securities at the date of acquisition in the available-for-sale category as our intention is to convert them into cash for operations. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. We follow the guidance provided by Emerging Issues Task Force Issue No. 03-01,The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, in order to assess whether our investments with unrealized loss positions are other than temporarily impaired. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method.

Inventories

Inventory cost is computed on an adjusted standard basis (which approximates actual cost on an average or first-in, first-out basis). Inventory costs consist primarily of the cost of semiconductors purchased from subcontractors, including wafer fabrication, assembly, testing and packaging, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, inventory provisions and shipping costs. We write down our inventory for estimated amounts related to lower of cost or market, obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand, future product purchase commitments, estimated manufacturing yield levels and market conditions. If actual market conditions are less favorable than those projected by management, or if our future product purchase commitments to our suppliers exceed our forecasted future demand for such products, additional future inventory write-downs may be required that could adversely affect our operating results. If actual market conditions are more favorable, we may have higher gross margins when products are sold. Sales to date of such products have not had a significant impact on our gross margin. Inventory reserves once established are not reversed until the related inventory has been sold or scrapped.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method based on estimated useful lives, generally three to five years. Depreciation expense includes the amortization of assets recorded under capital leases. Leasehold improvements and assets recorded under capital leases are amortized over the shorter of the lease term or the estimated useful life of the asset.

Debt Financing Costs

In connection with the ~~Notes,~~issuance of the convertible subordinated debentures, see Note ~~12,~~11, we incurred certain direct issuance costs from third parties who performed services that assisted in the closing of the transaction. These issuance costs were included in our consolidated balance ~~sheet~~sheets under “deposits and other assets” and were amortized on a straight line basis over the term of the financing. On October 24, 2003, we fully redeemed the Notes. In connection with the redemption, we recorded a $13.1 million charge in fiscal 2004, which included the write-off of $5.5 million of unamortized issuance costs.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Advertising Expenses

We expense advertising costs in the period in which they are incurred. Advertising expenses for fiscal 2006, 2005, and 2004 ~~and 2003~~ were ~~approximately~~$9.2 million, $15.2 million, and $11.3 million, ~~and $6.8 million,~~ respectively.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

Revenue Recognition

Product Revenue

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the product has been delivered, the price is fixed and determinable and collection is reasonably assured. For ~~all~~most sales, we use a binding purchase order and in certain cases we use a contractual agreement as evidence of an arrangement. We consider delivery to occur upon shipment provided title and risk of loss have passed to the customer based on the shipping terms. At the point of sale, we assess whether the arrangement fee is fixed and determinable and whether collection is reasonably assured. If we determine that collection of a fee is not reasonably assured, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash.

Our policy on sales to distributors is to defer recognition of revenue and related cost of revenue until the distributors resell the product.

We record estimated reductions to revenue for customer programs at the time revenue is recognized. Our customer programs primarily involve rebates, which are designed to serve as sales incentives to resellers of our products in various target markets. We account for rebates in accordance with Emerging Issues Task Force Issue 01-9, or EITF 01-9,Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products) and, as such, we accrue for 100% of the potential rebates and do not apply a breakage factor. Unclaimed rebates, which historically have not been significant, are reversed to revenue upon expiration of the rebate. Rebates typically expire six months from the date of the original sale.

Our customer programs also include marketing development funds, or MDFs. We account for MDFs as either a reduction of revenue or an operating expense in accordance with EITF 01-9. MDFs represent monies paid to retailers, system builders, original equipment manufacturers, or OEMs, distributors and add-in card partners that are earmarked for market segment development and expansion and typically are designed to support our partners’ activities while also promoting NVIDIA products.

If market conditions decline, we may take actions to increase amounts offered under customer programs, possibly resulting in an incremental reduction of revenue at the time such programs are offered.

We also record a reduction to revenue by establishing a sales return allowance for estimated product returns at the time revenue is recognized, based primarily on historical return rates. However, if product returns for a particular fiscal period exceed historical return rates we may determine that additional sales return allowances are required to properly reflect our estimated exposure for product returns.

License and Development Revenue

For license arrangements that require significant customization of our intellectual property components, we generally recognize this license revenue using the percentage-of-completion method of accounting over the period that services are performed. For all license and service arrangements accounted for under the percentage-of-completion method, we determine progress to completion based on actual direct labor hours incurred to date as a percentage of the estimated total direct labor hours required to complete the project. We periodically evaluate the actual status of each project to ensure that the estimates to complete each contract remain accurate. A provision for estimated losses on contracts is made in the period in which the loss becomes probable and can be reasonably estimated. To date, we have not recorded any such losses. Costs incurred in advance of revenue recognized are

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

recorded as deferred costs on uncompleted contracts. ~~If the amount of revenue recognized exceeds the amounts billed to customers, the excess amount is recorded as unbilled accounts receivable.~~ If the amount billed exceeds the amount of revenue recognized, the excess amount is recorded as deferred revenue. Revenue recognized in any period is dependent on our progress toward completion of projects in progress. Significant management judgment and discretion are used to estimate total direct labor hours. Any changes in or deviations from these estimates could have a material effect on the amount of revenue we recognize in any period.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, marketable securities and trade accounts receivable. Our investment policy requires the purchase of top-tier investment grade securities, the diversification of asset type and certain limits on our portfolio duration. All marketable securities are held in our name, managed by several investment managers and held by one major financial institution under a custodial arrangement. ~~Two customers~~One customer accounted for approximately ~~--27%~~11% of our accounts receivable balance at January ~~30, 2005.~~29, 2006. We perform ongoing credit evaluations of our customers’ financial condition and maintain an allowance for potential credit losses. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. Our overall estimated exposure excludes amounts covered by credit insurance and letters of credit.

Impairment of Long-Lived Assets

In accordance with Statement of Financial Accounting Standards No. 144, or SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets,long-lived assets, such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset. Assets and liabilities to be disposed of would be separately presented in the consolidated balance sheet and the assets would be reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated.

Rent Expense

We recognize rent expense on a straight-line basis over the lease period and have accrued for rent expense incurred, but not paid.

Accounting for Asset Retirement Obligations

In fiscal 2004, we adopted Statement of Financial Accounting Standards No. 143, or SFAS No. 143,Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. During fiscal 2005, we completed leasehold improvements at our headquarters facility in Santa Clara, California and recorded a liability of $4.5 million to return the property to its original condition upon lease termination in fiscal year 2013. During fiscal 2006, we continued the expansion of our international facilities, and completed leasehold improvements at our international sites. As a result, we recorded an additional liability of $2.0 million, of which $0.2 million relates to accretion expense, to return the properties at these sites to their original condition upon lease termination.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Income Taxes

Statement of Financial Accounting Standards No. 109, or SFAS No. 109,Accounting for Income Taxes, establishes financial accounting and reporting standards for the effect of income taxes. In accordance with SFAS No. 109, we recognize federal, state and foreign current tax liabilities or assets based on our estimate of taxes payable or refundable in the current fiscal year by tax jurisdiction. We also recognize federal, state and foreign deferred tax assets or liabilities, as appropriate, for our estimate of future tax effects attributable to temporary differences and carryforwards; and we record a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

Our calculation of current and deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. Our estimates of current and deferred tax assets and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting standards or tax laws in the United States, or foreign jurisdictions where we operate, or changes in other facts or circumstances. In addition, we recognize liabilities for potential United States and foreign income tax contingencies based on our estimate of whether, and the extent to which, additional taxes may be due. If we determine that payment of these amounts is unnecessary or if the recorded tax liability is less than our current assessment, we may be required to recognize an income tax benefit or additional income tax expense in our financial statements, accordingly.

Fair Value of Financial Instruments

The carrying value of cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their relatively short maturities as of January ~~30, 2005~~29, 2006 and January ~~25, 2004.~~30, 2005. Marketable securities are comprised of available-for-sale securities that are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. Fair value of the marketable securities is determined based on quoted market prices.

Foreign Currency Translation

We use the United States dollar as our functional ~~currency.~~currency for all of our subsidiaries. Foreign currency monetary assets and liabilities are remeasured into United States dollars at end-of-period exchange rates. Non-monetary assets and liabilities, including inventories, prepaid expenses and other current assets, property and equipment, deposits and other assets and equity, are remeasured at historical exchange rates. Revenue and expenses are remeasured at average exchange rates in effect during each period, except for those expenses related to the previously noted balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in “Other income (expense), net” and to date have not been significant.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income or loss. Other comprehensive income or loss components include unrealized gains or losses on available-for-sale securities, net of tax.

Goodwill

~~Effective fiscal 2003, we completed the adoption of~~We account for goodwill in accordance with Statement of Financial Accounting Standards No. 142, or SFAS No. 142,Goodwill and Other Intangible Assets. As required by SFAS No. 142, we discontinued amortizing the

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

remaining balances of goodwill as of the beginning of fiscal 2003. All remaining and future acquired goodwill will be subject to our annual impairment ~~tests annually,~~test during our fourth quarter of our fiscal year, or earlier if indicators of potential impairment exist, using a ~~fair-value-based~~fair value-based approach. Our impairment review process compares the fair value of the reporting unit in which the goodwill resides to its carrying value. ~~We determined that our reporting units are equivalent to our operating segments for~~For the purposes of completing our SFAS No. 142 ~~impairment test.~~ impairment test, we performed our analysis on a reporting unit basis. We utilize a two-step approach to testing goodwill for impairment. The first step tests for possible impairment by applying a fair value-based test. In computing fair value of our reporting units, we use estimates of future revenues, costs and cash flows from such units. The second step, if necessary, measures the amount of such an impairment by applying fair value-based tests to individual assets and liabilities. We elected to perform our annual goodwill impairment review during the fourth quarter of each fiscal year. We completed our most recent annual impairment test during the fourth quarter of fiscal ~~2005~~2006 and concluded that there was no impairment. However, future events or circumstances may result in a charge to earnings due to the potential for a write-down of goodwill in connection with such tests.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

Stock-Based Compensation

Statement of Financial Accounting Standards No. 148, or SFAS No. 148,Accounting for Stock-Based Compensation - Transition and Disclosure, amends the disclosure requirements of Statement of Financial Accounting Standards No. 123, or SFAS No. 123,Accounting for Stock-Based Compensation,to require more prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based compensation and the effect of the method used on reported results.

We use the intrinsic value method, as prescribed by Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees, to account for our stock-based employee compensation plans. As such, compensation expense is recorded if on the date of grant the current fair value per share of the underlying stock exceeds the exercise price per share. We recognize compensation cost for awards in accordance with Financial Accounting Standards Board Interpretation No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans,” which generally accelerates the compensation expense as compared to the straight-line method. Compensation cost for our stock-based compensation plans as determined consistent with ~~SFAS~~Statement of Financial Accounting Standards No. 123,Accounting for Stock-Based Compensation, would have decreased net income in the periods presented to the pro forma amounts indicated below:

Year Ended

Year Ended

Year Ended

January 30,

January 25,

January 26,

2005

2004

2003

(In thousands, except per share data)

Net income, as reported $ 100,356 $ 74,419 $ 90,799
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects 1,070 537 --
Add: Stock option exchange expense included in reported net income, net of related tax effects -- -- 37,285
Deduct: Compensation expense determined under fair value based method for stock options exchanged on October 25, 2002, net of related tax effects -- -- (167,714 )
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (87,071 ) (74,513 ) (37,698 )
Pro forma net income (loss) $ 14,355 $ 443 $ (77,328 )
Basic net income per share - as reported $ 0.60 $ 0.46 $ 0.59
Basic net income (loss) per share - pro forma $ 0.09 $ 0.00 $ (0.50 )
Diluted net income per share - as reported $ 0.57 $ 0.43 $ 0.54
Diluted net income (loss) per share - pro forma $ 0.08 $ 0.00 $ (0.50 )


	Year Ended
	January 29, 2006			January 30, 2005			January 25, 2004
	(As Restated)			(As Restated)			(As Restated)
	(In thousands, except per share data)
Net income, as reported	$	301,176		$	88,615		$	48,630
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		6,644			17,241			25,158
Deduct: Stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects		(90,405	)		(108,430	)		(71,419	)

Pro forma net income (loss)	$	217,415		$	(2,574	)	$	2,369

Basic net income per share - as reported	$	1.77		$	0.53		$	0.30
Basic net income (loss) per share - pro forma	$	1.28		$	(0.02	)	$	0.01
Diluted net income per share - as reported	$	1.65		$	0.50		$	0.28
Diluted net income (loss) per share - pro forma	$	1.19		$	(0.02	)	$	0.01

During the first quarter of fiscal 2006, we transitioned from a Black-Scholes model to a binomial model for calculating the estimated fair value of new stock-based compensation awards granted under our stock option plans. As a result of recent regulatory guidance, including SEC Staff Accounting Bulletin No. 107, or SAB No. 107, and in anticipation of the impending effective date of Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards No. 123(R), or SFAS No. 123(R),Share-Based Payment, we reevaluated the assumptions we use to estimate the value of employee stock options and shares issued under our employee stock

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

purchase plan, beginning with stock options granted and shares issued under our employee stock purchase plan in our first quarter of fiscal 2006. We determined that the use of implied volatility is expected to be more reflective of market conditions and, therefore, can reasonably be expected to be a better indicator of expected volatility than historical volatility. Additionally, in the first quarter of fiscal 2006, we began segregating options into groups for employees with relatively homogeneous exercise behavior in order to make full use of the capabilities of the binomial valuation model. As such, the expected term is based on detailed historical data about employees' exercise behavior, vesting schedules, and death and disability probabilities. We believe the resulting binomial calculation provides a more refined estimate of the fair value of our employee stock options. For our employee stock purchase plan, we decided to continue to use the Black-Scholes model to calculate the estimated fair value.

For the purpose of the pro forma calculation, the fair value of stock options granted under ~~the~~ our stock option plans ~~has~~and the fair value of shares issued under our employee stock purchase plan have been estimated ~~at the date of grant using the Black-Scholes option pricing model~~ with the following assumptions:

Year Ended
Year Ended
Year Ended

January 30,
January 25,
January 26,

2005
2004
2003
Weighted average expected life of stock options (in years) 4 4 4
Risk free interest rate 3.0% 2.4% 3.8%
Volatility 75% - 80% 80% 88%
Dividend yield -- -- --

~~For the first three quarters of fiscal 2005, we used a volatility factor of 80%. During the fourth quarter of fiscal 2005, we used a volatility factor of 75%.~~


	Stock Options
	Year Ended
	January 29, 2006	January 30, 2005	January 25, 2004
	(Using a binomial model)	(Using the Black-Scholes model)	(Using the Black-Scholes model)
Weighted average expected life of stock options (in years)	3.6 - 5.1	4.0	4.0
Risk free interest rate	4.0% - 4.4%	3.0%	2.4%
Volatility	34% - 48%	75% - 80%	80%
Dividend yield	—	—	—

	Employee Stock Purchase Plan
	Year Ended
	January 29, 2006	January 30, 2005	January 25, 2004
	(Using the Black-Scholes model)	(Using the Black-Scholes model)	(Using the Black-Scholes model)
Weighted average expected life of stock options (in years)	0.5 - 2.0	0.5 - 2.0	0.5 -1.0
Risk free interest rate	0.9% - 3.7%	1.1% - 2.1%	1.6% - 2.4%
Volatility	30% - 45%	80%	88%
Dividend yield	—	—	—

For the purpose of the pro forma calculation, the ~~weighted-average~~weighted average per share fair value of options granted during ~~the years ended January 30,~~fiscal 2006, 2005 ~~January 25,~~and 2004 ~~and January 26, 2003~~ was approximately $10.87, $14.10, ~~$9.43~~ and ~~$18.29,~~$13.11, respectively.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

For the purpose of the pro forma calculation, the fair value of shares purchased under our Employee Stock Purchase Plan, or the Purchase Plan, has been estimated at the date of purchase using the Black-Scholes option pricing model with the following assumptions:

Year Ended
Year Ended
Year Ended

January 30,
January 25,
January 26,

2005
2004
2003
Weighted average expected life (in months) 20 9 10
Risk free interest rate 1.9% 1.7% 3.7%
Volatility 80% 80% 88%
Dividend yield -- -- --

~~For the purpose of the pro forma calculation, the weighted-average~~weighted average fair value of shares purchased under the ~~Purchase Plan~~employee stock purchase plan during ~~the year ended January 30,~~fiscal 2006, 2005 ~~January 25,~~and 2004 ~~and January 26, 2003~~ was approximately $3.44, $5.28, and $3.76, ~~and $14.27,~~ respectively.

Net Income Per Share

Basic net income per share is computed using the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period, using the treasury stock method. Under the treasury stock method, the effect of stock options outstanding is not included in the computation of diluted net income per share for periods when their effect is anti-dilutive. The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the periods presented:

Year Ended

Year Ended

Year Ended

January 30,

January 25,

January 26,

2005

2004

2003

(In thousands, except per share data)

Numerator:
Numerator for basic and diluted net income per share $ 100,356 $ 74,419 $ 90,799

Denominator:
Denominator for basic net income per share, weighted average shares 166,062 160,924 153,513
Effect of dilutive securities:
Stock options outstanding 10,496 11,783 14,880
Denominator for diluted net income per share, weighted average shares 176,558 172,707 168,393

Net income per share:
Basic net income per share $ 0.60 $ 0.46 $ 0.59
Diluted net income per share $ 0.57 $ 0.43 $ 0.54

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


	Year Ended
	January 29, 2006		January 30, 2005		January 25, 2004
	(As Restated)		(As Restated)		(As Restated)
	(In thousands, except per share data)
Numerator:
Net income	$	301,176	$	88,615	$	48,630
Denominator:
Denominator for basic net income per share, weighted average shares		169,690		166,062		160,924
Effect of dilutive securities:
Stock options outstanding		13,162		9,750		11,130

Denominator for diluted net income per share, weighted average shares		182,852		175,812		172,054

Net income per share:
Basic net income per share	$	1.77	$	0.53	$	0.30
Diluted net income per share	$	1.65	$	0.50	$	0.28

Diluted net income per share does not include the effect of the following anti-dilutive common equivalent ~~shares:~~

Year Ended

Year Ended

Year Ended

January 30,

January 25,

January 26,

2005

2004

2003

(In thousands)

Stock options outstanding 13,740 7,906 5,892
Convertible subordinated debentures (equivalent common shares upon assumed conversion) -- -- 6,472
13,740 7,906 12,364

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

shares of stock options outstanding of 5.8 million, 13.7 million, and 7.9 million for the fiscal 2006, 2005 and 2004, respectively. The ~~weighted-average~~weighted average price of stock options excluded from the computation of diluted earnings per share was $35.58, $27.86, and $29.63 for fiscal 2006, 2005 and ~~$32.45 for the years ended January 30, 2005, January 25,~~ 2004, ~~and January 26, 2003,~~ respectively. The convertible subordinated debentures were convertible into shares of common stock at a conversion price of $46.36 per share and were anti-dilutive for the year ended January 26, 2003. The convertible subordinated debentures were redeemed on October 24, 2003.

Recently Issued Accounting Pronouncements

~~In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force Issue No. 03-1, or EITF 03-1,~~~~The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.~~EITF 03-1 provides guidance for identifying impaired investments and new disclosure requirements for investments that are deemed to be temporarily impaired. On September 30, 2004, the FASB issued a final staff position EITF Issue 03-1-1 that delays the effective date for the measurement and recognition guidance included in paragraphs 10 through 20 of EITF 03-1. Quantitative and qualitative disclosures required by EITF 03-1 remain effective for fiscal 2005. We do not believe the impact of adoption of this EITF consensus will~~have a material impact on our consolidated financial position, results of operations or cash flows.~~

~~In November 2004, the FASB issued No. 151, or SFAS No. 151,~~~~Inventory Costs~~,~~an amendment of ARB No. 43, Chapter 4.~~ SFAS No. 151 amends ARB No. 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) should be recognized as current period charges. In addition, SFAS No. 151 requires that allocation of fixed production overhead to the cost of conversion be based on the normal capacity of the production facilities. The provision of SFAS No. 151 shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We do not expect the adoption of SFAS No. 151 to have a material impact on our consolidated financial position, results of operations or cash flows.

In December 2004, the ~~FASB issued SFAS No. 153,~~Financial Accounting Standards Board, or ~~SFAS No. 153,~~~~Exchanges of Nonmonetary Assets — An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions~~~~. SFAS No. 153 eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29,~~~~Accounting for Nonmonetary Transactions~~, and replaces it with an exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for the fiscal periods beginning after June 15, 2005. We do not expect the adoption of SFAS 153 to have a material impact on our consolidated financial position, results of operations or cash flows.

~~In December 2004, the~~ FASB, issued Statement of Financial Accounting Standards No. 123(R), or SFAS No. 123(R),Share-Based Payment, which requires the measurement and recognition of compensation expense for all stock-based compensation payments. In April 2005, the SEC delayed the effective date of SFAS No. 123(R), which is now effective for ~~all interim and~~ annual periods ~~beginning~~that begin after June 15, 2005. ~~We are currently evaluating~~In March 2005, the ~~impact~~SEC issued Staff Accounting Bulletin No. 107, or SAB No. 107, which includes interpretive guidance for the initial implementation of SFAS No. 123(R). SFAS No. 123(R) allows for either prospective recognition of compensation expense or retrospective recognition. We intend to adopt SFAS No. 123(R) using the modified prospective method, which requires the application of the accounting standard as of January 30, 2006, the first day of our fiscal 2007. Expensing these incentives in future periods will materially and adversely affect our reported operating results as the stock-based compensation expense would be charged directly against our reported earnings. We anticipate that our stock-based compensation expense will be approximately $18 to $22 million for the first quarter of fiscal 2007 and we are unsure how the market will react to this adverse affect on our operating results, ~~and financial condition.The adoption of the SFAS No. 123(R) fair value method will have a material and adverse~~which could impact on our reported results of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because that will depend on the fair value and number of share-based payments granted in the future.stock price. However, had we adopted SFAS No. 123(R) in prior periods, the magnitude of the impact of that standard would have approximated the impact ~~ofStatement~~of Statement of Financial Accounting Standards No. 123,Accounting for Stock-Based Compensation, assuming the application of the Black-Scholes model as described in the disclosure of pro forma net income (loss) and pro forma net income (loss) per share ~~inNote~~in Note 1 of the Notes to ~~the~~ Consolidated Financial Statements under the subheading “Stock-Based Compensation.” SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. ~~This requirement~~

In June 2005, the FASB issued SFAS No. 154, or SFAS No. 154,Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS No. 154 applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle. We will ~~reduce net operating~~adopt SFAS 154 during the first quarter of fiscal 2007. We do not expect the adoption of SFAS No. 154 to have a material impact on our consolidated financial position, results of operations or cash ~~flows and increase net financing cash flows in periods after adoption.~~flows.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In June 2005, the FASB ratified the Emerging Issues Task Force’s, or EITF’s, Issue No. 05-06, or EITF No. 05-06, Determining the Amortization Period for Leasehold Improvements. EITF No. 05-06 provides that the amortization period used for leasehold improvements acquired in a business combination or purchased after the inception of a lease be the shorter of (a) the useful life of the assets or (b) a term that includes required lease periods and renewals that are reasonably assured upon the acquisition or the purchase. The provisions of EITF No. 05-06 are effective on a prospective basis for leasehold improvements purchased or acquired. We adopted EITF No. 05-06 during the second quarter of fiscal 2006 and it did not have a material impact on our consolidated financial position, results of operations or cash flows.

In November 2005, the FASB issued Staff Position, or FSP, FAS115-1/124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which addresses the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. This FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in this FSP amends SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and SFAS No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations, and APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. This FSP is effective for reporting periods beginning after December 15, 2005. We do not believe the adoption of this FSP will have a material impact on our consolidated financial position, results of operations or cash flows.

In November 2005, the FASB issued FSP FAS123(R)-3, Transition Election to Accounting for the Tax Effects of Share-Based Payment Awards. This FSP requires an entity to follow either the transition guidance for the additional-paid-in-capital pool as prescribed in SFAS No. 123(R), Share-Based Payment, or the alternative transition method as described in the FSP. An entity that adopts SFAS No. 123(R) using the modified prospective application may make a one-time election to adopt the transition method described in this FSP. An entity may take up to one year from the later of its initial adoption of SFAS No. 123(R) or the effective date of this FSP to evaluate its available transition alternatives and make its one-time election. This FSP became effective in November 2005. We continue to evaluate the impact that the adoption of this FSP could have on our consolidated financial position, results of operations or cash flows.

Note 2 - Restatement of Consolidated Financial Statements, Audit Committee and Company Findings

In May 2006, following media reports of stock option accounting investigations at other companies, the management of NVIDIA decided to conduct a review of stock option grants made by NVIDIA. Management advised our Board of Directors of the review at a regularly-scheduled meeting of the Board of Directors on May 25, 2006. The Board of Directors directed management to report its findings to the Audit Committee. Management presented its findings to the Audit Committee in late June 2006. Following that presentation, the Audit Committee determined that it should perform its own independent review of stock option grants made by NVIDIA. The Audit Committee, with the assistance of outside legal counsel, began its review on approximately June 29, 2006.

Based on the findings of the Audit Committee and our internal review, we identified a number of occasions on which we used an incorrect measurement date for financial accounting and reporting purposes. These errors resulted primarily from our use during our fiscal years 2000, 2001 and 2002, of certain date selection methods discussed below which resulted in employees receiving options with stated exercise prices lower than the market prices as measured based upon the actual grant dates. We ceased using such practices beginning in our fiscal year 2003. The Audit Committee found that, beginning in our fiscal year 2003, we improved our stock option grant processes and have generally granted and priced our employee stock options in an objective and consistent manner since that time. However, for one Company-wide annual stock option grant we made in fiscal 2004, we did not finalize the number of options allocated to each employee as of the stated grant date in May 2003, which resulted in stock-based compensation charges due to the change in the measurement date to the date the grants were finalized. The Audit Committee’s review did not identify any additional stock-based compensation charges from measurement date issues subsequent to that fiscal 2004 grant.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The types of errors we identified were as follows:

As a result of the findings of the Audit Committee, we concluded that we needed to amend our original filing on Form 10-K to restate our consolidated financial statements for the years ended January 29, 2006, January 30, 2005, and January 25, 2004 and the related disclosures.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth the impact of the additional non-cash charges for stock-based compensation expense and related tax effects on our historical financial statements for each of the three years ended January 29, 2006, January 30, 2005, and January 25, 2004.

Year Ended
January 29, 2006 January 30, 2005 January 25, 2004
As
Previously
Reported Adjustments As Restated As
Previously
Reported Adjustments As Restated As
Previously
Reported Adjustments As Restated
(In thousands, except per share data)
Revenue
$ 2,375,687 $ —   $ 2,375,687 $ 2,010,033 $ —   $ 2,010,033 $ 1,822,945 $ —   $ 1,822,945
Cost of revenue
1,464,892 762 1,465,654 1,360,547 1,931 1,362,478 1,294,067 3,617 1,297,684

Gross profit
910,795 (762 ) 910,033 649,486 (1,931 ) 647,555 528,878 (3,617 ) 525,261
Operating expenses:

Research and development
352,099 5,024 357,123 335,104 13,116 348,220 269,972 22,190 292,162
Sales, general and administrative
204,441 (2,353 ) 202,088 200,789 3,370 204,159 165,249 14,562 179,811
In-process research and development
—   —   —   —   —   —   3,500 —   3,500
Settlement costs
14,158 —   14,158 —   —   —   —   —   —

Total operating expenses
570,698 2,671 573,369 535,893 16,486 552,379 438,721 36,752 475,473

Income from operations
340,097 (3,433 ) 336,664 113,593 (18,417 ) 95,176 90,157 (40,369 ) 49,788
Interest income
20,698 —   20,698 11,422 —   11,422 18,561 —   18,561
Interest expense
(72 ) —   (72 ) (164 ) —   (164 ) (12,010 ) —   (12,010 )
Other income (expense), net
(502 ) —   (502 ) 594 —   594 3,033 —   3,033
Convertible debenture redemption expense
—   —   —   —   —   —   (13,068 ) —   (13,068 )

Income before income tax expense (benefit)
360,221 (3,433 ) 356,788 125,445 (18,417 ) 107,028 86,673 (40,369 ) 46,304
Income tax expense (benefit)
57,635 (2,023 ) 55,612 25,089 (6,676 ) 18,413 12,254 (14,580 ) (2,326 )

Net income
$ 302,586 $ (1,410 ) $ 301,176 $ 100,356 $ (11,741 ) $ 88,615 $ 74,419 $ (25,789 ) $ 48,630

Basic net income per share
$ 1.78 $ (0.01 ) $ 1.77 $ 0.60 $ (0.07 ) $ 0.53 $ 0.46 $ (0.16 ) $ 0.30

Diluted net income per share
$ 1.65 $ —   $ 1.65 $ 0.57 $ (0.07 ) $ 0.50 $ 0.43 $ (0.15 ) $ 0.28

Shares used in basic per share computation
169,690 —   169,690 166,062 —   166,062 160,924 —   160,924
Shares used in diluted per share computation
182,951 (99 ) 182,852 176,558 (746 ) 175,812 172,707 (653 ) 172,054
The following table sets forth the impact of the additional non-cash charges for stock-based compensation expense and related tax effects on our consolidated balance sheets as of January 29, 2006 and January 30, 2005.
January 29, 2006 January 30, 2005

As
Previously
Reported
Adjustments As Restated
As
Previously
Reported
Adjustments As Restated
(In thousands, except share and per share data)
ASSETS
Current assets:

Cash and cash equivalents
$ 551,756 $ —   $ 551,756 $ 208,512 $ —   $ 208,512
Marketable securities
398,418 —   398,418 461,533 —   461,533
Accounts receivable, less allowances of $10,837 and $13,153 in 2006 and 2005, respectively
318,186 —   318,186 296,279 —   296,279
Inventories
254,792 78 254,870 315,518 268 315,786
Prepaid expenses and other current assets
24,387 —   24,387 19,819 —   19,819
Deferred income taxes
1,393 1,289 2,682 3,265 1,712 4,977

Total current assets
1,548,932 1,367 1,550,299 1,304,926 1,980 1,306,906
Property and equipment, net
178,152 —   178,152 178,955 —   178,955
Deposits and other assets
27,477 —   27,477 9,034 —   9,034
Goodwill
145,317 —   145,317 108,107 —   108,107
Intangible assets, net
15,421 —   15,421 27,514 —   27,514
Deferred income taxes, non-current
—   38,021 38,021 —   33,035 33,035

$ 1,915,299 $ 39,388 $ 1,954,687 $ 1,628,536 $ 35,015 $ 1,663,551

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable
$ 179,395 $ —   $ 179,395 $ 238,223 $ —   $ 238,223
Accrued liabilities
259,264 —   259,264 182,077 —   182,077
Current portion of capital lease obligations
—   —   —   856 —   856

Total current liabilities
438,659 —   438,659 421,156 —   421,156
Deferred income tax liabilities
8,260 (8,260 ) —   20,754 (20,754 ) —
Other long-term liabilities
10,624 9,412 20,036 8,358 12,946 21,304
Commitments and contingencies - see Note 12

Stockholders’ equity:

Preferred stock, $.001 par value; 2,000,000 shares authorized; none issued
—   —   —   —   —   —
Common stock, $.001 par value; 1,000,000,000 shares authorized; 179,963,979 shares issued and 171,477,456 outstanding in 2006; and 169,173,898 shares issued and 167,089,545 outstanding in 2005
180 —   180 169 —   169
Additional paid-in capital
798,251 167,533 965,784 636,618 179,433 816,051
Deferred compensation
(1,676 ) (1,928 ) (3,604 ) (2,926 ) (10,651 ) (13,577 )
Treasury stock
(212,142 ) —   (212,142 ) (24,644 ) —   (24,644 )
Accumulated other comprehensive loss, net
(1,957 ) —   (1,957 ) (3,463 ) —   (3,463 )
Retained earnings
875,100 (127,369 ) 747,731 572,514 (125,959 ) 446,555

Total stockholders' equity
1,457,756 38,236 1,495,992 1,178,268 42,823 1,221,091

$ 1,915,299 $ 39,388 $ 1,954,687 $ 1,628,536 $ 35,015 $ 1,663,551

The additional non-cash charges for stock-based compensation expense and related tax effects had no impact on net cash flows from operations, investing activities, and financing activities reported in our consolidated statements of cash flows. In addition, the consolidated statements of stockholders’ equity have been restated to reflect the impact of the restatement adjustments on the consolidated stockholders’ equity amounts.
NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 3 - Acquisition of MediaQ, Inc.

On August 19, 2003, we completed the acquisition of MediaQ, Inc., or MediaQ, a leading provider of graphics and multimedia technology for wireless mobile devices. Our primary reasons for the acquisition of MediaQ, Inc. were to accelerate our entry into the handheld devices market, use MediaQ’s two-dimensional, or 2D, and low power capabilities, allowing us to continue to focus on three-dimensional, or 3D, and advanced video efforts, use existing MediaQ channel and design wins, and enhance MediaQ’s PDA business through our existing OEM and ~~ODM~~original design manufacturer channels.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The aggregate purchase price consisted of cash consideration of approximately $71.3 million, including $1.3 million of direct acquisition ~~costs. Following is a summary~~costs and $3.5 million of ~~estimated fair values of the assets acquired and liabilities assumed:~~

	~~Fair Market Value~~			~~Straight-Line~~~~Depreciation/Amortization Period~~
	~~(In thousands)~~
~~Accounts receivable~~	$	~~1,505~~			--
~~Inventories~~		~~4,066~~			--
~~Other assets~~		~~323~~			--
~~Property and equipment~~		~~1,460~~			~~9 months - 3 years~~
~~Deferred income tax assets~~		~~1,601~~			--
~~In-process research and development~~		~~3,500~~			--
~~Goodwill~~		~~52,913~~			--
~~Intangible assets:~~
~~Existing technology~~		~~13,100~~			~~1 - 3 years~~
~~Customer relationships~~		~~2,100~~			~~18 months~~
~~Backlog~~		~~600~~			~~3 months~~
~~Non-compete agreement~~		~~150~~			~~18 months~~
~~Total assets acquired~~	$	~~81,318~~

~~Current liabilities~~	$	~~(1,767~~	)		--
~~Current liabilities recognized in connection with the business combination~~		~~(1,868~~	)		--
~~Long-term deferred income tax liabilities~~		~~(6,380~~	)		--
~~Total liabilities assumed~~	$	~~(10,015~~	)

~~Net assets acquired~~	$	~~71,303~~

~~The amount of the purchase price allocated to purchased~~ in-process research and development, or IPR&D, The amount of the IPR&D represents the value assigned to research and development projects of MediaQ that had commenced but had not yet reached technological feasibility and ~~have~~had no alternative future use. In accordance with SFAS No. 2,Accounting for Research and Development Costs, as clarified by FIN 4,Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method an interpretation of FASB Statement No. 2, amounts assigned to IPR&D meeting the above-stated criteria were charged to expense as part of the allocation of the purchase price.

The pro forma results of operations have not been presented for the acquisition of MediaQ because the effect of this acquisition was not considered material.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 34 - 3dfx

During fiscal year 2002, we completed the purchase of certain assets from 3dfx Interactive, Inc., or 3dfx, for an aggregate purchase price of approximately $74.2 million. The 3dfx asset purchase was accounted for under the purchase method of accounting and closed on April 18, 2001. Under the terms of the Asset Purchase Agreement, the cash consideration due at the closing was $70.0 million, less $15.0 million that was loaned to 3dfx pursuant to a Credit Agreement dated December 15, 2000. The Asset Purchase Agreement also provided, subject to the other provisions thereof, that if 3dfx properly certified that all its debts and other liabilities had been provided for, then we would have been obligated to pay 3dfx two million shares of NVIDIA common stock. If 3dfx could not make such a certification, but instead properly certified that its debts and liabilities could be satisfied for less than $25.0 million, then 3dfx could have elected to receive a cash payment equal to the amount of such debts and liabilities and a reduced number of shares of our common stock, with such reduction calculated by dividing the cash payment by $25.00 per share. If 3dfx could not certify that all of its debts and liabilities had been provided for, or could not be satisfied for less than $25.0 million, we would not be obligated under the agreement to pay any additional consideration for the assets. ~~We are currently party~~

In October 2002, 3dfx filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern District of California. In March 2003, we were served with a complaint filed by the Trustee appointed by the Bankruptcy Court which sought, among other things, payments from us as additional purchase price related to ~~litigation relating to~~our purchase of certain ~~aspects~~assets of 3dfx. In early November 2005, after many months of mediation, NVIDIA and the Official Committee of Unsecured Creditors of 3dfx reached a conditional settlement of the ~~asset purchase~~Trustee’s claims against NVIDIA. This conditional settlement, which will be subject to the review and ~~3dfx’s subsequent bankruptcy in October 2002. Please refer to Note 12~~approval of the ~~Notes~~Bankruptcy Court, calls for a payment of approximately $30.6 million to the ~~Consolidated Financial Statements~~3dfx estate. Under the settlement, $5.6 million relates to various administrative expenses and Trustee fees, and $25.0 million relates to the satisfaction of debts and liabilities owed to the general unsecured creditors of 3dfx. As such, during the three months ended October 30, 2005, we recorded $5.6 million as a charge to settlement costs and $25.0 million as additional purchase price for 3dfx. Please see Note 12 for further information regarding this litigation.

The 3dfx asset purchase price of ~~$70.0~~$95.0 million and $4.2 million of direct transaction costs ~~of $4.2 million~~ were allocated based on fair values presented below. Upon the adoption of Statement of Financial Accounting Standards No. 142, or SFAS No. 142, approximately $3.0 million of intangible assets previously allocated to workforce in place were reclassified into goodwill in fiscal 2003. In addition, amortization of goodwill ceased in accordance with SFAS No. 142.

Fair Market Value

Straight-Line Amortization Period

(In thousands)

(Years)

Property and equipment $ 2,433 1-2
Trademarks 11,310 5
Goodwill 60,418 --
Total $ 74,161


	Fair Market Value		Straight-Line Amortization Period
	(In thousands)		(Years)
Property and equipment	$	2,433	1-2
Trademarks		11,310	5
Goodwill		85,418	—

Total	$	99,161

The final allocation of the purchase price of the 3dfx assets is contingent upon the amount of and circumstances surrounding additional consideration, if any, that we may pay related to the 3dfx asset purchase.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 45 - Goodwill

The carrying amount of goodwill is as follows:

Year Ended

Year Ended

Year Ended

January 30,

January 25,

January 26,

2005

2004

2003

(In thousands)

3dfx
$
50,326

$
50,326

$
50,326

MediaQ 52,913 53,695 --
Other 4,868 4,888 3,901
Total goodwill
$
108,107

$
108,909

$
54,227


	January 29, 2006		January 30, 2005		January 25, 2004
	(In thousands)
3dfx	$	75,326	$	50,326	$	50,326
MediaQ		52,913		52,913		53,695
Other		17,078		4,868		4,888

Total goodwill	$	145,317	$	108,107	$	108,909

During the fourth quarter of fiscal 2006, we recorded $12.2 million as goodwill for the acquisition of a small international company. The acquisition was accounted for under the purchase method of accounting and closed on December 30, 2005. During the third quarter of fiscal 2006, we recorded $25.0 million as goodwill related to the purchase of certain assets of 3dfx. Please refer to Note 4 of the Notes to Consolidated Financial Statements for further information. In fiscal 2005, the amount allocated to MediaQ goodwill ~~changed~~was adjusted to $52,913 as a result of additional information that became available. This information was primarily related to liabilities that were less than originally estimated at the time of acquisition.

During ~~the second quarter of~~ fiscal 2005, in conjunction with the reorganization of our chief operating decision maker, the Chief Executive Officer, began reviewing financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance. Webusiness reporting units, we reassigned goodwill to ~~the affected~~our reporting units by using a ~~"relative~~relative fair ~~value"~~value allocation approach. In computing fair value of our reporting units, we use estimates of future revenues, costs and cash flows from such units. The amount of goodwill allocated to our GPU, MCP, ~~WMP~~Handheld GPU, Consumer Electronics, and All Other segments as of January ~~30, 2005,~~29, 2006, was ~~$78.1~~$99.3 million, ~~$11.4~~$15.1 million, ~~$11.6~~$12.7 million, $11.9 million, and ~~$7.0~~$6.3 million, respectively. P~~lease~~Please refer to Note 1516 of the Notes to Consolidated Financial Statements for further segment information.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

Note 56 - Amortizable Intangible Assets

We are currently amortizing our intangible assets with definitive lives over periods ranging from 1 to 5 ~~years.~~years on a straight-line basis. The components of our amortizable intangible assets are as follows:

Year Ended

Year Ended

January 30, 2005

January 25, 2004

Gross CarryingAmount

AccumulatedAmortization

Net CarryingAmount

Gross CarryingAmount

AccumulatedAmortization

Net CarryingAmount

(In thousands)

Technology licenses $ 17,236 $ (9,841 ) $ 7,395 $ 15,178 $ (7,161 ) $ 8,017
Patents 23,260 (15,400 ) 7,860 19,319 (8,992 ) 10,327
Acquired intellectual property 27,086 (18,578 ) 8,508 27,067 (10,590 ) 16,477
Trademarks 11,310 (8,544 ) 2,766 11,310 (6,283 ) 5,027
Other 1,494 (509 ) 985 250 (135 ) 115
Total intangible assets $ 80,386 $ (52,872 ) $ 27,514 $ 73,124 $ (33,161 ) $ 39,963


	January 29, 2006							January 30, 2005
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Technology licenses	$	21,586	$	(13,595	)	$	7,991	$	17,236	$	(9,841	)	$	7,395
Patents		23,750		(19,911	)		3,839		23,260		(15,400	)		7,860
Acquired intellectual property		27,086		(24,516	)		2,570		27,086		(18,578	)		8,508
Trademarks		11,310		(10,807	)		503		11,310		(8,544	)		2,766
Other		1,494		(976	)		518		1,494		(509	)		985

Total intangible assets	$	85,226	$	(69,805	)	$	15,421	$	80,386	$	(52,872	)	$	27,514

Amortization expense associated with intangible assets for ~~the years ended January 30,~~fiscal 2006, 2005 ~~January 25,~~and 2004 ~~and January 26, 2003~~ was $16.9 million, $19.7 million, ~~$16.2 million~~ and ~~$9.6~~$16.2 million, respectively. Future amortization expense for the net carrying amount of intangible assets at January ~~30, 2005~~29, 2006 is estimated to be ~~$15.8 million in fiscal 2006, $8.9~~$10.5 million in fiscal 2007, ~~$2.6~~$4.3 million in fiscal 2008, and ~~the remaining amortization expense of $0.2~~$0.6 million in fiscal ~~2009.~~

2009 and thereafter.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 67 - Marketable Securities

We account for our investment instruments in accordance with Statement of Financial Accounting Standards No. 115, or SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securities. All of our cash equivalents and marketable securities are treated as “available-for-sale” under SFAS No. 115. Cash equivalents consist of financial instruments which are readily convertible into cash and have original maturities of three months or less at the time of acquisition. Marketable securities consist primarily of highly liquid investments with a maturity of greater than three months when purchased and some equity investments. We classify our marketable securities at the date of acquisition in the available-for-sale category as our intention is to convert them into cash for operations. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method. Net realized losses for fiscal 2006 and 2005 were $2.8 million and $0.4 ~~million.~~million, respectively. Net realized gains for fiscal 2004 ~~and 2003~~ were $2.9 ~~million and $0.3 million, respectively.~~million.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

The following is a summary of cash equivalents and marketable securities at January ~~30, 2005~~29, 2006 and January ~~25, 2004:~~

January 30, 2005

Amortized Cost

Unrealized Gain

Unrealized (Loss)

Estimated Fair Value

(In thousands)

Publicly traded equity securities $ 687 $ 220 -- $ 907
Asset-backed securities 177,771 1 (1,786 ) 175,986
Commercial paper 7,854 -- -- 7,854
Obligations of the United States government & its agencies 104,768 -- (895 ) 103,873
United States corporate notes, bonds and obligations 182,688 6 (1,874 ) 180,820
Money market 164,377 -- -- 164,377
Total $ 638,145 $ 227 $ (4,555 ) $ 633,817

Classified as:
Cash equivalents $ 172,284
Marketable securities 461,533
Total $ 633,817

January 25, 2004

Amortized Cost

Unrealized Gain

Unrealized (Loss) (1)

Estimated Fair Value

(In thousands)

Asset-backed securities $ 65,147 $ 214 $ (127 ) $ 65,234
Commercial paper 15,592 -- -- 15,592
Obligations of the United States government & its agencies 198,084 574 (111 ) 198,547
United States corporate notes, bonds and obligations 175,678 957 (90 ) 176,545
Money market 143,661 -- -- 143,661
Total $ 598,162 $ 1,745 $ (328 ) $ 599,579

Classified as:
Cash equivalents $ 209,958
Marketable securities 389,621
Total $ 599,579

30, 2005:


	January 29, 2006
	Amortized Cost		Unrealized Gain		Unrealized (Loss)			Estimated Fair Value
	(In thousands)
Asset-backed securities	$	224,649	$	1	$	(983	)	$	223,667
Commercial paper		138,091		13		(7	)		138,097
Obligations of the United States government & its agencies		72,753		8		(834	)		71,927
United States corporate notes, bonds and obligations		179,930		5		(1,467	)		178,468
Money market		256,593		—		—			256,593

Total	$	872,016	$	27	$	(3,291	)	$	868,752

Classified as:
Cash equivalents								$	470,334
Marketable securities									398,418

Total								$	868,752

(1) The fair value of investments with loss positions is $96.9 million at January 25, 2004. We evaluated the nature of these investments, which are primarily obligations of the United States government and its agencies and United States corporate notes, the duration of the impairments, and the amount of the impairments relative to the underlying portfolio and concluded that such amounts were not “other-than-temporary” as defined by SFAS No. 115,~~Accounting for Certain Investments in Debt and Equity Securities~~.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


	January 30, 2005
	Amortized Cost		Unrealized Gain		Unrealized (Loss)			Estimated Fair Value
	(In thousands)
Publicly traded equity securities	$	687	$	220	$	—		$	907
Asset-backed securities		177,771		1		(1,786	)		175,986
Commercial paper		7,854		—		—			7,854
Obligations of the United States government & its agencies		104,768		—		(895	)		103,873
United States corporate notes, bonds and obligations		182,688		6		(1,874	)		180,820
Money market		164,377		—		—			164,377

Total	$	638,145	$	227	$	(4,555	)	$	633,817

Classified as:
Cash equivalents								$	172,284
Marketable securities									461,533

Total								$	633,817

The following table provides the breakdown of the investments with unrealized losses at January ~~30, 2005:~~

Less than 12 months

12 months or greater

Total

Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses

(In thousands)

Asset-backed securities $ 167,468 $ (1,661 ) $ 7,015 $ (125 ) $ 174,483 $ (1,786 )
Commercial paper -- -- -- -- -- --
Obligations of the United States government & its agencies 102,864 (895 ) -- -- 102,864 (895 )
United States corporate notes, bonds and obligations 165,884 (1,862 ) 4,127 (12 ) 170,011 (1,874 )
Money market -- -- -- -- -- --
Total $ 436,216 $ (4,418 ) $ 11,142 $ (137 ) $ 447,358 $ (4,555 )

29, 2006:


	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(In thousands)
Asset-backed securities	$	78,286	$	(334	)	$	48,293	$	(649	)	$	126,579	$	(983	)
Commercial paper		19,600		(7	)		—		—			19,600		(7	)
Obligations of the United States government & its agencies		39,032		(434	)		22,851		(400	)		61,883		(834	)
United States corporate notes, bonds and obligations		139,842		(485	)		64,593		(982	)		204,435		(1,467	)
Money market		—		—			—		—			—		—

Total	$	276,760	$	(1,260	)	$	135,737	$	(2,031	)	$	412,497	$	(3,291	)

As of January 29, 2006, we had 143 investments that were in an unrealized loss position with an average unrealized loss duration of less than one year. The gross unrealized losses related to fixed income securities were due to changes in interest rates. We have determined that the gross unrealized losses on investment securities at January ~~30, 2005~~29, 2006 are temporary in nature. We review our investments to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Our investment policy requires the purchase of top-tier investment grade securities, the diversification of asset type and certain limits on our portfolio duration.

The amortized cost and estimated fair value of cash equivalents and marketable securities classified as available-for-sale at January 29, 2006 and January 30, 2005 ~~and at January 25, 2004~~ by ~~expected~~contractual maturity are shown below.

All of our marketable securities are debt instruments with the exception of $0.9 million of publicly traded equity securities ~~in fiscal~~at January 30, 2005.

January 30, 2005

January 25, 2004

AmortizedCost

EstimatedFair Value

AmortizedCost

EstimatedFair Value

(In thousands)

Less than one year $ 198,242 $ 197,844 $ 282,762 $ 283,123
Due in 1 - 5 years 416,085 412,141 315,400 316,456
Due in 6-7 years 23,132 22,925 -- --
Total $ 637,459 $ 632,910 $ 598,162 $ 599,579

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


	January 29, 2006				January 30, 2005
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In thousands)
Less than one year	$	491,259	$	491,246	$	198,242	$	197,844
Due in 1 - 5 years		364,065		361,047		416,085		412,141
Due in 6-7 years		16,692		16,459		23,132		22,925

Total	$	872,016	$	868,752	$	637,459	$	632,910

Note 78 - Balance Sheet Components

Certain balance sheet components are as follows:

January 30,

January 25,

Inventories:

2005

2004

(In thousands)

Raw materials $ 23,225 $ 22,131
Work in-process 130,211 44,523
Finished goods 162,082 167,584
Total inventories $ 315,518 $ 234,238

January 30,

January 25,

2005

2004

Property and Equipment:

(In thousands)

Software $ 125,310 $ 116,150
Test equipment 86,883 73,287
Computer equipment 82,428 70,173
Leasehold improvements 79,160 58,649
Construction in process 3,264 1,620
Office furniture and equipment 18,777 17,996
395,822 337,875
Accumulated depreciation and amortization (216,867 ) (147,846 )
Property and equipment, net $ 178,955 $ 190,029


	January 29, 2006		January 30, 2005
	(As Restated)		(As Restated)
	(In thousands)
Inventories:
Raw materials	$	25,743	$	23,225
Work in-process		107,847		130,211
Finished goods		121,280		162,350

Total inventories	$	254,870	$	315,786

The significant decrease in work-in-process and finished goods was the result of significant reductions in older products, offset by an increase in new products.


	January 29, 2006		January 30, 2005
	(In thousands)
Deposits and other assets:
Investments in non-affiliates	$	11,684	$	2,000
Long-term prepayments		7,504		2,594
Other		8,289		4,440

Total deposits and other assets	$	27,477	$	9,034

The $9.7 million increase in investments in non-affiliates is related to cost method investments in two private companies.


	January 29, 2006			January 30, 2005			Estimated Useful Life
	(In thousands)						(Years)
Property and Equipment:
Software	$	153,618		$	125,310		3 - 5
Test equipment		88,468			86,883		3
Computer equipment		106,061			82,428		3
Leasehold improvements		88,376			79,160		(A)
Construction in process		2,260			3,264		(B)
Office furniture and equipment		21,618			18,777		5

		460,401			395,822
Accumulated depreciation and amortization		(282,249	)		(216,867	)

Total property and equipment, net	$	178,152		$	178,955

(A)

Leasehold improvements are amortized based on the lesser of either the asset’s estimated useful life or the remaining lease term.

(B)

Construction in process represents assets that had not been in service as of the balance sheet date.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Depreciation expense for fiscal 2006, 2005, and 2004 ~~and 2003~~ was $76.4 million, $71.3 million, ~~$59.3 million~~ and ~~$42.6~~$59.3 million, respectively. Assets recorded under capital leases included in property and equipment were ~~$19.3~~$17.1 million and ~~$19.5~~$19.3 million as of January ~~30, 2005~~29, 2006 and January ~~25, 2004,~~30, 2005, respectively. Related accumulated amortization was ~~$17.8~~$17.1 million and ~~$14.0~~$17.8 million as of January ~~30, 2005~~29, 2006 and January ~~25, 2004,~~30, 2005, respectively. Amortization expense for fiscal 2006, 2005, ~~2004~~ and ~~2003~~2004 related to capital leases was $1.2 million, $3.8 million, and $5.4 million, ~~and $4.4 million, respectively~~

January 30,

January 25,

2005

2004

Accrued Liabilities:

(In thousands)

Accrued customer programs $ 83,013 $ 54,875
Deferred revenue 11,500 --
Customer advances 1,457 11,530
Taxes payable 28,826 29,609
Accrued payroll and related expenses 37,016 30,270
Deferred rent 10,844 8,151
Other 9,421 10,320
Total accrued liabilities $ 182,077 $ 144,755

January 30,

January 25,

2005

2004

Long-term Liabilities:

(In thousands)

Asset retirement obligation $ 4,483 $ --
Technology licenses 3,875 4,582
Total long-term liabilities $ 8,358 $ 4,582

respectively.


	January 29, 2006		January 30, 2005
	(In thousands)
Accrued Liabilities:
Accrued customer programs	$	90,056	$	83,013
Deferred revenue		217		11,500
Customer advances		1,556		1,457
Taxes payable		58,355		28,826
Accrued payroll and related expenses		53,080		37,016
Deferred rent		11,879		10,844
Accrued legal settlement		30,600		—
Other		13,521		9,421

Total accrued liabilities	$	259,264	$	182,077


	January 29, 2006		January 30, 2005
	(As Restated)		(As Restated)
	(In thousands)
Other Long-term Liabilities:
Asset retirement obligation	$	6,440	$	4,483
Other long-term liabilities		13,596		16,821

Total other long-term liabilities	$	20,036	$	21,304

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Note 9 - ~~(Continued)~~Guarantees

~~Note 8 - Guarantees~~

FASB Interpretation No. 45, or FIN 45,Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. In addition, FIN 45 requires disclosures about the guarantees that an entity has issued, including a tabular reconciliation of the changes of the entity’s product warranty liabilities.

We record a reduction to revenue for estimated product returns at the time revenue is recognized primarily based on historical return rates. The reductions to revenue for estimated product returns for fiscal 2006, 2005 ~~fiscal~~and 2004 ~~and fiscal 2003~~ are as follows:

Description

Balance at Beginning of Period

Additions (1)

Deductions (2)

Balance at End of Period

(In thousands)

Year ended January 30, 2005
Allowance for sales returns $ 9,421 $ 22,463 $ (20,197 ) $ 11,687
Year ended January 25, 2004
Allowance for sales returns $ 13,228 $ 23,796 $ (27,603 ) $ 9,421
Year ended January 26, 2003
Allowance for sales returns $ 15,586 $ 20,147 $ (22,505 ) $ 13,228

NVIDIA CORPORATION AND SUBSIDIARIES

~~(1) Allowances for sales returns are charged as a reduction to revenue.~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

~~(2) Represents amounts written off against the allowance for sales returns.~~


Description	Balance at Beginning of Period		Additions (1)		Deductions (2)			Balance at End of Period
	(In thousands)
Year ended January 29, 2006 Allowance for sales returns	$	11,687	$	35,127	$	(36,575	)	$	10,239

Year ended January 30, 2005 Allowance for sales returns	$	9,421	$	22,463	$	(20,197	)	$	11,687

Year ended January 25, 2004 Allowance for sales returns	$	13,228	$	23,796	$	(27,603	)	$	9,421

(1)	Allowances for sales returns are charged as a reduction to revenue.

(2)	Represents amounts written off against the allowance for sales returns.

In connection with certain agreements that we have executed in the past, we have at times provided indemnities to cover the indemnified party for matters such as tax, product and employee liabilities. We have also on occasion included intellectual property indemnification provisions in our technology related agreements with third parties. Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability. ~~However, historically costs related to these indemnification provisions have not been significant.~~ As such, we have not recorded any liability in our consolidated financial statements for such indemnifications.

Note 910 - Stockholders’ Equity

Stock Repurchase Program

On August 9, 2004 we announced that our Board of Directors, or the Board, had authorized a stock repurchase program to repurchase shares of our common stock, subject to certain specifications, up to an aggregate maximum amount of $300.0 million. As part of our share repurchase program, we have entered into and we may continue to enter into structured share repurchase transactions with financial institutions. These agreements generally require that we make an up-front payment in exchange for the right to receive a fixed number of shares of our common stock upon execution of the agreement, and a potential incremental number of shares of our common stock, within a pre-determined range, at the end of the term of the agreement. During the fourth quarter of fiscal ~~2005,~~2006, we repurchased ~~2.1~~1.3 million shares of our common stock for $50.0 million under a structured share repurchase transaction, which we recorded on the trade date of the transaction. Through the end of the fourth quarter of fiscal 2006, we have repurchased 8.5 million shares under our stock repurchase program for a total cost of ~~approximately $24.6~~$213.2 million.

During the first quarter of fiscal 2007, we entered into a structured share repurchase transaction to repurchase shares of our common stock for $50.0 million that we expect to settle prior to the end of our first fiscal quarter.

On March 6, 2006, we announced that our Board of Directors had approved an increase in our existing stock repurchase program. We announced a $400 million increase to the original stock repurchase program we had announced in August 2004. As a result of this increase, the amount of common stock the Board of Directors has authorized to be repurchased has now been increased to a total of $700 million. The repurchases will be made from time to time in the open market, in privately negotiated transactions, or in structured stock repurchase transactions, in compliance with the Securities and Exchange Commission Rule 10b-18, subject to market conditions, applicable legal requirements, and other factors. The program does not obligate NVIDIA to acquire any particular amount of common stock and the program may be suspended at any time at our discretion.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Convertible Preferred Stock

As of January ~~30, 2005,~~29, 2006, there were no shares of preferred stock outstanding.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

2000 Nonstatutory Equity Incentive Plan

On August 1, 2000, our Board of Directors approved the 2000 Nonstatutory Equity Incentive Plan, or the 2000 Plan, to provide for the issuance of our common stock to employees and affiliates who are not directors, officers or 10% stockholders. The 2000 Plan provides for the issuance of nonstatutory stock options, stock bonuses and restricted stock purchase rights. Option grants issued under the 2000 plan generally expire in six to 10 years. The Compensation Committee appointed by the Board of Directors has the authority to amend the 2000 Plan and to determine the option term, exercise price and vesting period of each grant. Initial option grants generally vest ratably over a four-year period, with 25% becoming vested approximately one year from the date of grant and the remaining 75% vesting on a quarterly basis over the next three years. Subsequent option grants generally vest quarterly over a ~~four-year~~three-year period. There were a total of 21,939,202 shares authorized for issuance and ~~10,505,378~~10,595,890 shares available for future issuance under the 2000 Plan as of January ~~30, 2005.~~

29, 2006.

1998 Equity Incentive Plan

The Equity Incentive Plan, or the 1998 Plan, was adopted by our Board of Directors on February 17, 1998 and was approved by our stockholders on April 6, 1998 as an amendment and restatement of our then existing Equity Incentive Plan which had been adopted on May 21, 1993. The 1998 Plan provides for the issuance of our common stock to directors, employees and consultants. The 1998 Plan was subsequently amended on March 7, 2006. The 1998 Plan provides for the issuance of stock bonuses, restricted stock purchase rights, incentive stock options or nonstatutory stock options. There were a total of 110,094,385 shares authorized for issuance and ~~12,006,326~~5,059,598 shares available for future issuance under the 1998 Plan as of January ~~30, 2005.~~

29, 2006.

Pursuant to the 1998 Plan, the exercise price for incentive stock options is at least 100% of the fair market value on the date of grant or for employees owning in excess of 10% of the voting power of all classes of stock, 110% of the fair market value on the date of grant. For nonstatutory stock options, the exercise price is no less than 85% of the fair market value on the date of grant.

Option grants issued under the 1998 Plan generally expire in six to 10ten years. Vesting periods are determined by the Board of Directors or the Compensation Committee of the Board of Directors. Initial option grants made after February 10, 2004 under the 1998 Plan generally vest ratably each quarter over a three year period. Subsequent option grants are generally granted for performance and generally vest quarterly over a ~~four~~three year period.

1998 Non-Employee Directors’ Stock Option Plan

In February 1998, our Board of Directors adopted the 1998 Non-Employee Directors’ Stock Option Plan, or the Directors Plan, to provide for the automatic grant of non-qualified options to purchase shares of our common stock to our directors who are not employees or consultants of us or of an affiliate of us.

In July 2000, the Board of Directors amended the 1998 Plan to incorporate the automatic grant provisions of the Directors’ Plan into the 1998 Plan. Future automatic grants to non-employee directors will be made according to the terms of the Directors’ Plan, but will be made out of the 1998 Plan until such time as shares may become available for issuance under the amended Directors’ Plan. In May 2002, the Directors’ Plan was amended further to reduce the number of shares granted to our non-employee directors. The altered automatic grant provisions of the Directors’ Plan are also incorporated into the 1998 Plan. The terms of the amended Directors’ Plan are described below.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Under the amended Directors Plan, each non-employee director who is elected or appointed to our Board of Directors for the first time is automatically granted an option to purchase 75,000 shares, which vests quarterly over a three-year period, or Initial Grant. Previously, such a director was entitled to a grant of 200,000 shares, vesting monthly over a four-year period.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

Under the amended Directors Plan, on August 1, 2002, each non-employee director was automatically granted an option to purchase 75,000 shares, which will vest 33% on the first anniversary of the grant date, with the remaining 66% vesting quarterly over the second and third years after the date of grant, provided that the director has attended at least 75% of the meetings during the year following the date of the grant, or 2002 Grants. Previously, such a director was entitled to an annual grant of 80,000 shares, vesting 100% on the first anniversary of the date of the grant.

On August 1, 2003 and on each August 1 thereafter, each non-employee director will be automatically granted an option to purchase 25,000 shares, or Annual Grant. These Annual Grants will begin vesting on the second anniversary of the date of the grant and vest quarterly during the next year. The Annual Grants will be fully vested on the third anniversary of the date of the grant, provided that the director has attended at least 75% of the meetings during the year following the date of the grant.

On August 1, 2002 and each August 1 of each year thereafter, each non-employee director who is a member of a committee of the Board of Directors will automatically be granted an option to purchase 5,000 shares, or Committee Grant. The Committee Grants vest in full on the first anniversary of the date of the grant, provided that the director has attended at least 75% of the meetings during the year following the date of the grant. Previously, such a director was entitled to a grant of 20,000 shares, vesting in full on the first anniversary of the date of the grant. Directors who were members of two committees, Messrs. Cox, Gaither and Jones, waived their grant of an additional 5,000 shares for being a member of a second committee in fiscal ~~2003~~2004, 2005 and ~~2004.~~

2006.

If a non-employee director fails to attend at least 75% of the regularly scheduled meetings during the year following the grant of an option, rather than vesting as described previously, the 2002 Grants and Committee Grants will vest annually over four years following the date of grant at the rate of 10% per year for the first three years and 70% for the fourth year, and the Annual Grants will vest 30% upon the three-year anniversary of the grant date and 70% for the fourth year, such that in each case the entire option will become fully vested on the four-year anniversary of the date of the grant. For the 2002 Grants, Annual Grants and Committee Grants, if the person has not been serving on the Board of Directors or committee since a prior year’s annual meeting, the number of shares granted will be reduced pro rata for each full quarter prior to the date of grant during which such person did not serve in such capacity.

The Compensation Committee administers the amended Directors Plan. A total of 1,200,000 shares have been authorized and issued under the amended Directors Plan of which none is available for future issuance as of January ~~30, 2005.~~29, 2006. As described above, future grants to non-employee directors will be made out of the 1998 Plan.

Employee Stock Purchase Plan

In February 1998, our Board of Directors approved the 1998 Employee Stock Purchase Plan, or the Purchase Plan. In June 1999, the Purchase Plan was amended to increase the number of shares reserved for issuance automatically each year at the end of our fiscal year for the next 10 years (commencing at the end of fiscal 2000 and ending 10 years later in 2009) by an amount equal to 2% of the outstanding shares on each such date, including on an as-if-converted basis preferred stock and convertible notes, and outstanding options and warrants, calculated using the treasury stock method; provided that the maximum number of shares of common stock available for issuance from the Purchase Plan could not exceed 26,000,000 shares. There are a total of ~~22,751,516~~26,000,000 shares authorized for issuance. At January ~~30, 2005, 5,737,168~~29, 2006, 7,531,781 shares have been issued under the Purchase Plan and ~~17,014,348~~18,468,219 shares are available for future issuance. At January 25, 2004, 3,760,932 shares had been issued under the Purchase Plan and 15,438,882 shares were available for future issuance. At January 26, 2003, 2,104,670 shares had been issued under the Purchase Plan and 13,576,682 shares were available for future issuance.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Purchase Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. Under the Purchase Plan, the Board has authorized participation by eligible employees, including officers, in periodic offerings following the adoption of the Purchase Plan. Under the Purchase Plan, separate offering periods shall be no longer than 27 months. Under the current offering adopted pursuant to the Purchase Plan, each offering period is 24 months, which is divided into four purchase periods of 6 months.

Employees are eligible to participate if they are employed by us or an affiliate of us as designated by the Board. Employees who participate in an offering may have up to 10% of their earnings withheld pursuant to the Purchase Plan up to certain limitations and applied on specified dates determined by the Board to the purchase of shares of common stock. The Board may increase this percentage at its discretion, up to 15%. The price of common stock purchased under the Purchase Plan will be equal to the lower of the fair market value of the common stock on the commencement date of each offering period and the purchase date of each offering period at 85% at the fair market value of the common stock on the relevant purchase date. Employees may end their participation in the ~~offering~~Purchase Plan at any time during the offering period, and participation ends automatically on termination of employment with us and in each case their contributions are refunded.

The following summarizes the transactions under the 1998 Plan, 2000 Plan and Directors Plan:

Options
Available forGrant

OptionsOutstanding

Weighted Average Price Per Share

Balances, January 27, 2002 9,416,255 51,879,729 $ 19.14
Authorized 13,957,063 -- --
Granted (8,522,650 ) 8,522,650 28.09
Shares of common stock issued in exchange for stock Options (3,815,069 ) -- --
Exercised -- (3,816,695 ) 4.62
Cancelled - unvested (1) 18,067,604 (18,067,604 ) 36.53
Cancelled - vested (2) 2,882,376 (2,882,376 ) 32.51
Balances, January 26, 2003 31,985,579 35,635,704 $ 12.93
Authorized 8,796,156 -- --
Granted (12,680,144 ) 12,675,144 14.77
Exercised -- (4,688,703 ) 5.17
Cancelled 855,440 (855,440 ) 19.26
Balances, January 25, 2004 28,957,031 42,766,705 $ 14.20
Authorized -- -- --
Granted (8,514,926 ) 8,514,926 23.48
Exercised -- (3,051,875 ) 8.29
Cancelled 2,069,599 (2,069,599 ) 18.82
Balances, January 30, 2005 22,511,704 46,160,157 $ 16.10

~~(1)~~

~~Includes 16,193,886 unvested stock options cancelled in exchange for shares of common stock.~~

~~(2)~~

~~Includes 2,649,607 vested stock options cancelled in exchange for shares of common stock.~~


	Options Available for Grant		Options Outstanding		Weighted Average Exercise Price Per Share
Balances, January 26, 2003	31,985,579		35,635,704		$	12.93
Authorized	8,796,156		—			—
Granted	(12,680,144	)	12,675,144			14.77
Exercised	—		(4,688,703	)		5.17
Cancelled	855,440		(855,440	)		19.26

Balances, January 25, 2004	28,957,031		42,766,705		$	14.20
Authorized	—		—			—
Granted	(8,514,926	)	8,514,926			23.48
Exercised	—		(3,051,875	)		8.29
Cancelled	2,069,599		(2,069,599	)		18.82

Balances, January 30, 2005	22,511,704		46,160,157		$	16.10
Authorized	—		—			—
Granted	(8,208,893	)	8,208,893			27.73
Exercised	—		(9,037,133	)		11.89
Cancelled	1,352,677		(1,352,677	)		20.57

Balances, January 29, 2006	15,655,488		43,979,240		$	19.00

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes information about stock options outstanding as of January ~~30, 2005:~~

Options Outstanding

Options Exercisable

Range of Exercise Prices

NumberOutstanding

Weighted Average Remaining Contractual
Life

Weighted Average ExercisePrice

NumberExercisable

Weighted Average ExercisePrice

$0.09 - $0.09 2,000 1.9 $ 0.09 2,000 $ 0.09
0.33 - 0.33 123,300 2.6 $ 0.33 123,300 $ 0.33
0.66 - 0.79 567,960 2.9 $ 0.75 567,960 $ 0.75
1.04 - 1.38 174,668 3.0 $ 1.29 174,668 $ 1.29
1.58 - 2.25 4,465,078 3.3 $ 1.78 4,465,078 $ 1.78
4 .09 - 5.88 3,609,167 4.5 $ 4.80 3,585,022 $ 4.80
7.65 - 11.07 4,387,246 6.0 $ 9.45 3,274,188 $ 9.49
11.51 - 17.18 14,133,223 5.0 $ 14.49 6,857,542 $ 14.81
17.53 - 26.25 13,953,002 5.4 $ 22.38 6,210,995 $ 19.79
26.38 - 39.54 4,120,013 5.9 $ 31.90 3,182,306 $ 31.44
42.98 - 53.61 624,000 6.6 $ 43.35 617,750 $ 43.26
65.47 - 65.47 500 7.0 $ 65.47 375 $ 65.47
$0.09 - $65.47 46,160,157 5.1 $ 16.10 29,061,184 $ 14.05

29, 2006:


	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.09 - 0.09	2,000	0.9	$	0.09	2,000	$	0.09
0.33 - 0.33	112,300	1.6	$	0.33	112,300	$	0.33
0.66 - 0.79	327,710	1.8	$	0.74	327,710	$	0.74
1.38 - 1.93	3,128,914	2.2	$	1.75	3,128,914	$	1.75
2.21 - 2.25	170,250	2.6	$	2.25	170,250	$	2.25
4.09 - 5.88	2,387,233	3.5	$	4.73	2,385,911	$	4.73
7.65 - 11.07	3,673,508	5.0	$	9.54	3,251,830	$	9.62
11.51 - 17.18	10,083,542	4.0	$	14.49	6,076,088	$	14.67
17.53 - 26.25	15,871,324	4.7	$	23.02	6,350,213	$	20.85
26.38 - 39.54	7,597,959	5.3	$	32.15	3,625,484	$	31.93
42.98 - 53.61	624,000	5.6	$	43.35	623,750	$	43.35
65.47 - 65.47	500	6.0	$	65.47	500	$	65.47

$0.09 - $65.47	43,979,240	4.4	$	19.00	26,054,950	$	15.86

Note 1011 - Retirement Plan

We have a 401(k) Retirement Plan, or the Plan, covering substantially all of our United States employees. Under the Plan, participating employees may defer up to 100 percent of their pre-tax earnings, subject to the Internal Revenue Service annual contribution limits.

~~Note 11 - Stock Option Exchange~~

~~On September 26, 2002, we commenced an offer, or the Offer, to our employees to exchange outstanding stock options with exercise prices equal to or greater than $27.00 per share, or Eligible Options.~~ The Offer was implemented in order to improve employee morale by realigning the cash and equity components of our compensation programs, eliminate significant out-of-the-money options and reduce the number of outstanding stock options relative We do not make employer contributions to the ~~number of shares outstanding, or "options overhang", thereby reducing future potential dilution to existing stockholders.~~ Stock options to purchase an aggregate of approximately 20,615,000 shares were eligible for tender at the commencement of the Offer, representing approximately 39% of our outstanding stock options as of the commencement date. Only employees of NVIDIA or one of our subsidiaries as of September 26, 2002 who continued to be employees through the Offer termination date of October 24, 2002 were eligible to participate in the Offer. Employees who were on medical, maternity, worker’s compensation, military or other statutorily protected leaves of absence, or a personal leave of absence, were also eligible to participate in the Offer. Employees who were terminated on or before the Offer termination date of October 24, 2002, were not eligible to participate in the Offer. In addition, our Chief Executive Officer and Chief Financial Officer and members of our Board of Directors were not eligible to participate in this Offer.

Eligible employees who participated in the Offer received, in exchange for the cancellation of Eligible Options, a fixed amount of consideration, represented by fully vested, non-forfeitable common stock less applicable withholding taxes, equal to the number of shares underlying such Eligible Options, multiplied by $3.20, less the amount of applicable tax withholdings, divided by $10.46, the closing price of our common stock as reported on the Nasdaq National Market on October 24, 2002. We concluded that the consideration paid for the Eligible Options represented "substantial consideration" as required by Issue 39(f) of EITF Issue No. 00-23 "Issues Relating to Accounting for Stock Compensation Under APB Opinion No. 25 and FASB Interpretation No. 44," as the $3.20 per Eligible Option was at least the fair value for each Eligible Option, as determined using the Black-Scholes option-pricing model. In determining the fair value of the Eligible Options using the Black-Scholes option-pricing model, we used the following assumptions: (i) the expected remaining life was deemed to be the remaining term of the options, which was approximately 7.8 years; (ii) a volatility of 50.0% during the expected life; (iii) a risk-free interest rate of 3.71%; and (iv) no dividends. The amount of $3.20 per Eligible Option was established at the commencement of the offer period and remained unchanged throughout the offer period.

Plan.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

Variable accounting is not required under Issue 39(a) of EITF Issue No. 00-23 for Eligible Options subject to the Offer that were not surrendered for cancellation, because: (i) the shares of our common stock offered as consideration for the surrendered options were fully vested and non-forfeitable; and (ii) the number of shares to be received by an employee who accepted the Offer was based on the number of surrendered Eligible Options multiplied by $3.20, divided by the fair value of the stock at the date of exchange. We further concluded that the "look back" and "look forward" provisions of FASB Interpretation No. 44, paragraph 45 did apply to the stock options surrendered for cancellation. Based on the terms of the Offer, variable accounting is not required for any of our outstanding stock options existing at the time of the Offer. We did not grant stock options to any participants in the Offer for at least six months following October 24, 2002. If any stock options were granted to participants in the Offer within the six months following October 24, 2002, those stock options would have received variable accounting.

On October 24, 2002, the offer period ended and we were obligated to exchange approximately 18,843,000 Eligible Options for total consideration of $61.8 million, consisting of $39.9 million in fully vested, non-forfeitable shares of our common stock (approximately 3,815,000 shares) and $21.9 million in employer and employee related taxes. The number of fully vested, non-forfeitable shares of our common stock to be issued was determined by dividing the total consideration due (less the amount of applicable tax withholdings) by the closing price of our common stock on October 24, 2002 of $10.46 per share.

The shares of our common stock issued in exchange for Eligible Options were fully vested. However, a portion of the shares equal to 25% of the total consideration, based on the closing price of our common stock on the offer termination date, have a six month holding period, and a portion of the shares equal to 25% of such total consideration have a one year holding period. Withholding taxes and other charges were deducted from the remaining 50% of the total consideration, and the shares issued after such withholding did not have a holding restriction.

Note 12 - Financial Arrangements, Commitments and Contingencies

Inventory Purchase Obligations

At January ~~30, 2005,~~29, 2006, we had outstanding inventory purchase obligations totaling ~~$457.3~~$401.6 million.

Convertible Subordinated Debentures

In October 2000, we sold $300.0 million 4¾4³/4% convertible subordinated debentures, ~~due 2007,~~ or the Notes, due October 15, 2007 in a public offering. Proceeds from the offering were approximately $290.8 million after deducting underwriting discounts, commissions and offering expenses. Issuance costs related to the offering totaled $9.2 million and were amortized to interest expense over the term of the Notes. Interest on the Notes accrued at the rate of 4¾4³/4% per annum and was payable semiannually in arrears on April 15 and October 15 of each year, commencing April 15, 2001. Interest expense, excluding the amortization of issuance costs, related to the Notes for fiscal 2004 ~~and 2003~~ was $10.4 ~~million and $14.2 million, respectively.~~million. The Notes were redeemable at our option on or after October 20, 2003 and were also convertible at the option of the holder at any time prior to the close of business on the maturity date, unless previously redeemed or repurchased, into shares of common stock at a conversion price of $46.36 per share, subject to adjustment in certain circumstances.

On October 24, 2003, we fully redeemed the Notes. The aggregate principal amount of the Notes outstanding was $300.0 million, which included $18.6 million of Notes that we had purchased in the open market during the three months ended October 26, 2003. The redemption price was equal to approximately 102.7% of the outstanding principal amount of the Notes, plus accrued and unpaid interest up to, but excluding, the redemption date. In connection with the redemption of the Notes, we recorded a charge in our consolidated ~~income~~ statement of income approximately $13.1 million, which included a $7.6 million redemption premium and $5.5 million for the write-off of unamortized issuance costs.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Lease Obligations

Our headquarters complex is located on a leased site in Santa Clara, California and is comprised of five buildings. The related leases expire in 2012 and each includes two seven-year renewals at our option. Future minimum lease payments under these operating leases total ~~approximately $172.9~~$152.8 million over the remaining terms of the leases, including predetermined rent escalations, and are included in the future minimum lease payment schedule below.

In addition to the commitment of our headquarters, we have other domestic and international office facilities under operating leases expiring through fiscal 2013. Future minimum lease payments under our noncancelable ~~capital and~~ operating leases as of January ~~30, 2005,~~29, 2006, are as follows:

Year ending January:

Operating

Capital

(In thousands)

2006 $ 27,534 $ 869
2007 27,425 --
2008 27,422 --
2009 26,615 --
2010 26,327 --
2011 and thereafter 55,794 --
Total $ 191,117 $ 869
Less amount representing interest at rates ranging from 5% - 10% (13 )
Present value of minimum lease payments 856
Less current portion 856
Long term portion $ 0


	Operating
	(In thousands)
Year ending January:
2007	$	29,557
2008		29,321
2009		28,396
2010		27,794
2011		27,812
2012 and thereafter		29,603

Total	$	172,483

Rent expense for the years ended January 29, 2006, January 30, 2005, and January 25, 2004 ~~and January 26, 2003~~ was ~~approximately~~$29.5 million, $28.0 million, and $26.4 million, ~~and $25.6 million,~~ respectively.

The following is an analysis of the property and equipment under capital leases by major classes:

January 30,

January 25,

2005

2004

(In thousands)

Property and Equipment:

Software and other $ 634 $ 634
Test equipment 9,125 9,309
Computer equipment 4,331 4,331
Office equipment and furniture 5,232 5,232
$ 19,322 $ 19,506
Accumulated amortization (17,835 ) (14,016 )
Property and equipment, net $ 1,487 $ 5,490


	January 29, 2006			January 30, 2005
	(In thousands)
Property and Equipment:
Software and other	$	629		$	634
Test equipment		6,895			9,125
Computer equipment		4,331			4,331
Leasehold improvements		4			—
Office furniture and equipment		5,232			5,232

	$	17,091		$	19,322
Accumulated depreciation and amortization		(17,091	)		(17,835	)

Total property and equipment, net	$	—		$	1,487

~~NVIDIA CORPORATION AND SUBSIDIARIES~~Litigation

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~3dfx

~~Litigation~~

~~3dfx~~

On December 15, 2000, NVIDIA Corporation and one of our indirect subsidiaries entered into an agreement to purchase certain graphics chip assets from 3dfx. The 3dfx asset purchase closed on April 18, 2001.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In May 2002, we were served with a California state court complaint filed by the landlord of 3dfx’s San Jose, California commercial real estate lease. In ~~October 2002, 3dfx filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern District of California. In~~ December 2002, we were served with a California state court complaint filed by the landlord of 3dfx’s Austin, Texas commercial real estate lease. The landlords’ complaints both assert claims for, among other things, interference with contract, successor liability and fraudulent ~~transfer. The landlords’ are seeking~~transfer and seek to recover, among other things, amounts owed on their leases with 3dfx in the aggregate amount of approximately $10 million. In October 2002, 3dfx filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern District of California. The landlords’ actions were subsequently removed to the United States Bankruptcy Court for the Northern District of California and consolidated with a complaint filed by the Trustee in the 3dfx bankruptcy case for purposes of discovery. Upon motion by NVIDIA in 2005, the District Court withdrew the reference to the Bankruptcy Court and the landlord actions were removed to the United States District Court for the Northern District of California. On November 10, 2005, the District Court granted NVIDIA's motion to dismiss the landlords’ respective amended complaints and allowed the landlords to have until February 4, 2006 to amend their complaints. The landlords’ refiled claims against NVIDIA in early February 2006, and NVIDIA again requested the District Court to dismiss all such claims made by the landlords. A hearing on NVIDIA’s new motions to dismiss is set for hearing on April 17, 2006. Discovery is stayed pending this hearing and no trial date has been set in these actions. We believe the claims asserted against us by the landlords are without merit and we will continue to defend ourselves vigorously.

In March 2003, we were served with a complaint filed by the Trustee appointed by the Bankruptcy Court to represent the interests of the 3dfx bankruptcy estate. The Trustee’s complaint asserts claims for, among other things, successor liability and fraudulent ~~transfer. The Trustee’s complaint~~transfer and seeks additional payments from ~~us,~~us. On October 13, 2005, the ~~amount~~Court held a hearing on the Trustee’s motion for summary adjudication. On December 23, 2005, the Court issued its ruling denying the Trustee's Motion for Summary Adjudication in all material respects and holding that NVIDIA is prevented from disputing that the value of ~~which has not been quantified.~~the 3dfx transaction to NVIDIA was less than $108.0 million. The ~~landlords’ actions have been removed~~Court expressly denied the Trustee's request to find that the value of the 3dfx assets conveyed to NVIDIA were at least $108.0 million. In early November 2005, after many months of mediation, NVIDIA and the Official Committee of Unsecured Creditors, or the Creditors’ Committee, reached a conditional settlement of the Trustee’s claims against NVIDIA. This conditional settlement, presented as the centerpiece of a proposed Plan of Liquidation in the bankruptcy case, is subject to a confirmation process through a vote of creditors and the review and approval of the Bankruptcy Court ~~from~~after notice and hearing.The scope and schedule for that confirmation process has yet to be determined, butwe expect that hearing to now occur sometime in the ~~Superior Court of California and consolidated~~next few months. The Trustee has advised that he intends to object to the settlement. The settlement with the ~~Trustee’s action~~Creditors’ Committee calls for ~~purposes~~a payment of ~~discovery. Discovery~~approximately $30.6 million to the 3dfx estate. Under the settlement, $5.6 million relates to various administrative expenses and Trustee fees, and $25.0 million relates to the satisfaction of debts and liabilities owed to the general unsecured creditors of 3dfx. As such, during the three month period ended October 30, 2005, we recorded $5.6 million as a charge to settlement costs and $25.0 million as additional purchase price for 3dfx.

The Bankruptcy Court, over objection of the Creditors’ Committee and NVIDIA, has ordered the discovery portion of the litigation to proceed while the settlement is ~~currently proceeding and~~pending approval through the confirmation process. However, no trialdate has been ~~set. We believe~~set in the ~~claims asserted against us are without merit~~Trustee's action. In addition, following the Trustee’s filing of a Form 8-K on behalf of 3dfx, in which the Trustee disclosed the terms of the proposed settlement agreement between NVIDIA and ~~we will continue~~the Creditor’s Committee, certain shareholders of 3dfx filed a petition with the Bankruptcy Court to ~~defend ourselves vigorously.~~

appoint an official committee to represent the claimed interest’s of 3dfx shareholders. That petition was granted and an Equity Holder’s Committee was appointed. Counsel for the Equity Holder’s Committee has announced an intention to file a competing Plan of Reorganization or Liquidation in the Trustee’s case.

Opti Incorporated

On October 19, 2004, Opti Incorporated, or Opti, filed a complaint for patent infringement against NVIDIA in the United States District Court for the Eastern District of Texas. Opti asserts that unspecified NVIDIA chipsets infringe five ~~United States~~U.S. patents held by Opti. Opti seeks unspecified damages for our alleged conduct, ~~attorneys~~attorneys’ fees and triple damages for alleged willful infringement by NVIDIA. NVIDIA filed a response to this complaint in December 2004. ~~Discovery has not begun and no~~A case management conference was held in July 2005 where a trial date ~~has been set.~~was set for July 2006. A court

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

mandated mediation was held in January 2006 and did not resolve the matter. Discovery continues, as well as preparation for the Markman hearing on claim construction. The Markman hearing is scheduled for April 13, 2006. We believe the claims asserted against us are without merit and we will continue to defend ourselves vigorously.

We do not have sufficient information to determine whether a loss is probable. As such, we have not recorded any liability in our consolidated financial statements for such, if any, loss.

American Video Graphics

In August 2004, a Texas limited partnership named American Video Graphics, LP, , or AVG, filed three separate complaints for patent infringement against various corporate defendants, ~~(not~~not including ~~NVIDIA)~~NVIDIA, in the United States District Court for the Eastern District of Texas. AVG initially asserted that each of the approximately thirty defendants sells products that infringe one or more of seven separate patents that AVG claims relate generally to graphics processing functionality. Each of the three lawsuits targeted a different group of defendants; one case involves approximately twenty of the leading personal computer manufacturers, the PC Makers Case, one case involves the three leading video game console makers, the Game Console Case, and one case involves approximately ten of the leading video game publishers, the Game Publishers Case. In November 2004, NVIDIA sought and was granted permission to intervene in two of the three pending AVG ~~lawsuits, the PC Makers Case and the Game Console Case. NVIDIA’s~~lawsuits. Our complaint in intervention ~~alleges~~alleged that both ~~that~~of the patents in suit ~~are~~were invalid and that, to the extent AVG’s claims target NVIDIA products, the asserted patents ~~are~~were not infringed. ~~Two~~

settling party.

We are subject to other legal proceedings, but we do not believe that the ultimate outcome of any of these proceedings will have a material adverse effect on our financial position or overall trends in results of operations. However, if an unfavorable ruling were to occur in any specific period, there exists the possibility of a material adverse impact on the results of operations of that period.

Note 13 - Settlement Costs

Settlement costs were $14.2 million for fiscal 2006. The settlement costs are associated with two litigation matters, 3dfx and AVG. AVG is settled. The 3dfx matter is not finally settled and is subject to judicial review and the completion of appropriate procedures and documents. However, based on the potential settlement in this case, we have concluded that a loss is probable and that we can reasonably estimate the amount of loss. Please refer to Note 12 of the Notes to Consolidated Financial Statements for further information.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 1314 - Income Taxes

The provision for (benefit from) income taxes applicable to income before income taxes consists of the following:

Year Ended

Year Ended

Year Ended

January 30,

January 25,

January 26,

2005

2004

2003

(In thousands)

Current:
Federal $ -- $ -- $ --
State 355 221 135
Foreign 8,826 (51,590 ) 20,555
Total current 9,181 (51,369 ) 20,690
Deferred:
Federal 4,683 19,861 20,569
State (620 ) 35,274 9,319
Foreign -- -- --
Total deferred 4,063 55,135 29,888
Charge in lieu of taxes attributable to employer stock option plans 11,845 8,488 9,180
Provision for income taxes $ 25,089 $ 12,254 $ 59,758


	Year Ended
	January 29, 2006			January 30, 2005			January 25, 2004
	(As restated)			(As restated)			(As restated)
	(In thousands)
Current:
Federal	$	22,050		$	—		$	—
State		375			355			221
Foreign		11,012			8,826			(51,590	)

Total current		33,437			9,181			(51,369	)
Deferred:
Federal		(2,692	)		1,237			3,568
State		—			(620	)		39,967
Foreign		—			—			—

Total deferred		(2,692	)		617			43,535
Charge in lieu of taxes attributable to employer stock option plans		24,867			8,615			5,508

Provision for/(benefit from) income taxes	$	55,612		$	18,413		$	(2,326	)

Income before income taxes consists of the following:

Year Ended

Year Ended

Year Ended

January 30,

January 25,

January 26,

2005

2004

2003

(In thousands)

Domestic $ 9,556 $ (17,816 ) $ 20,764
Foreign 115,889 104,489 129,793
$ 125,445 $ 86,673 $ 150,557


	Year Ended
	January 29, 2006		January 30, 2005			January 25, 2004
	(As Restated)		(As Restated)			(As Restated)
	(In thousands)
Domestic	$	52,112	$	(7,537	)	$	(55,928	)
Foreign		304,675		114,565			102,232

	$	356,787	$	107,028		$	46,304

The provision for (benefit from) income taxes differs from the amount computed by applying the federal statutory income tax rate of 35% to income before income taxes as follows:

Year Ended

Year Ended

Year Ended

January 30,

January 25,

January 26,

2005

2004

2003

(In thousands)

Tax expense computed at Federal Statutory Rate $ 43,906 $ 30,336 $ 52,695
State income taxes (benefit), net of federal tax effect 230 544 (4,241 )
Foreign tax rate differential (8,462 ) (11,671 ) 23,222
Research and experimental credit (10,710 ) (5,230 ) (12,048 )
In-process research and development -- 1,225 --
Change in estimates -- (36,766 ) --
Increase in beginning of year valuation allowance -- 33,599 --
Other 125 217 130
Provision for income taxes $ 25,089 $ 12,254 $ 59,758


	Year Ended
	January 29, 2006			January 30, 2005			January 25, 2004
	(As Restated)			(As Restated)			(As Restated)
	(In thousands)
Tax expense computed at Federal Statutory Rate	$	124,876		$	37,460		$	16,206
State income taxes, net of federal tax effect		847			219			5,232
Foreign tax rate differential		(57,286	)		(8,462	)		(14,142	)
Research and experimental credit		(13,175	)		(10,935	)		(5,426	)
In-process research and development		—			—			1,225
Change in estimates		—			—			(36,766	)
Increase in beginning of year valuation allowance		—			—			31,027
Other		350			131			318

Provision for/(benefit from) income taxes	$	55,612		$	18,413		$	(2,326	)

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The tax effect of temporary differences that gives rise to significant portions of the deferred tax assets and liabilities are presented below:

January 30,

January 25,

2005

2004

Deferred tax assets:

(In thousands)

Net operating loss carryforwards $ 101,238 $ 105,503
Accruals and reserves, not currently deductible for tax purposes 13,373 10,286
Property, equipment and intangible assets 17,182 19,194
Research and other tax credit carryforwards 113,856 99,806
Gross deferred tax assets 245,649 234,789
Less valuation allowance (190,563 ) (182,669 )
Net deferred tax assets 55,086 52,120
Deferred tax liabilities:

Unremitted earnings of foreign subsidiaries (72,575 ) (57,468 )
Net deferred tax liability
$ (17,489 ) $ (5,348 )


	January 29, 2006			January 30, 2005
	(As Restated)			(As Restated)
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	134,385		$	97,464
Accruals and reserves, not currently deductible for tax purposes		16,109			18,407
Property, equipment and intangible assets		16,928			17,182
Research and other tax credit carryforwards		146,089			113,856
Deferred Equity Compensation		45,924			53,458

Gross deferred tax assets		359,435			300,367
Less valuation allowance		(233,016	)		(193,987	)

Deferred tax assets		126,419			106,380
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries		(85,716	)		(68,368	)

Net deferred tax asset	$	40,703		$	38,012

Income tax expense (benefit) as a percentage of income before taxes, or our annual effective tax rate, was 15.6% in fiscal 2006, 17.2% in fiscal 2005, and (5.0%) in fiscal 2004. The change in the rate was primarily a result of changes in our geographic mix of income subject to tax. As of January ~~30, 2005,~~29, 2006, we had a valuation allowance of ~~$190.6~~$233.0 million. Of the total valuation allowance, ~~$145.7~~$178.3 million is attributable to certain net operating loss and tax credit carryforwards resulting from the exercise of employee stock options. The tax benefit of these net operating loss and tax credit carryforwards, if and when ~~realization is sustained,~~realized, would be accounted for as a credit to stockholders' equity. Of the remaining valuation allowance as of January ~~30, 2005, $19.9~~29, 2006, $19.5 million relates to federal and state tax attributes acquired in certain acquisitions for which realization of the related deferred tax assets was determined not ~~more~~ likely ~~than not~~ to be realized due, in part, to potential utilization limitations as a result of stock ownership changes, and ~~$25.0~~$35.2 million relates to certain state deferred tax assets that management determined not ~~more~~ likely ~~than not~~ to be realized due, in part, to projections of future taxable income. To the extent realization of the deferred tax assets related to certain acquisitions becomes probable, recognition of these acquired tax benefits would first reduce goodwill to zero, then reduce other non-current intangible assets related to the acquisition to zero with any remaining benefit reported as a reduction to income tax expense. To the extent realization of the deferred tax assets related to certain state tax benefits becomes probable, we would recognize an income tax benefit in the period such asset is more likely than not to be realized.

As of January ~~30, 2005,~~29, 2006, we had a federal net operating loss carryforward of approximately ~~$274.4~~$363.6 million and cumulative state net operating loss carryforwards of approximately ~~$144.4~~$170.8 million. The federal net operating loss carryforward will expire beginning in fiscal 2012 and the state net operating loss carryforwards will begin to expire in fiscal 2007 according to the rules of each particular state. As of January ~~30, 2005,~~29, 2006, we had federal research and experimentation tax credit carryforwards of approximately ~~$72.6~~$92.1 million that will begin to expire in fiscal ~~2008; and federal foreign tax credit carryforwards of approximately $0.2 million that will begin to expire in fiscal 2011.~~2008. The research and experimentation tax credit carryforward attributable to states is approximately ~~$57.8~~$78.2 million, of which approximately ~~$55.6~~$75.3 million is attributable to the State of California and may be carried over indefinitely, and approximately ~~$2.2~~$2.9 million is attributable to various other states and will expire beginning in fiscal 2016 according to the rules of each particular state. We have other California state tax credit carryforwards of approximately $4.9 million that will begin to expire in fiscal ~~2006.~~2007. Utilization of net operating losses and tax credit carryforwards may be subject to limitations due to ownership changes and other limitations provided by the Internal Revenue Code and similar state provisions. If such a limitation applies, the net operating loss and tax credit carryforwards may expire before full utilization.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

The American Jobs Creation Act of 2004, or Act, was signed into law on October 22, 2004. ~~This act creates~~The Act provided a temporary incentive for United States ~~multinationals~~multinational corporations to repatriate accumulated income earned outside the United States at a federal effective tax rate of 5.25%. ~~On December 21, 2004,~~In the ~~Financial Accounting Standards Board, or FASB, issued FASB Staff Position No. FAS 109-2,~~~~Accounting and Disclosure Guidance for~~fourth quarter of fiscal 2006, we repatriated $420 million in foreign earnings under the ~~Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004, which allows an enterprise time beyond the financial reporting period of enactment to evaluate the~~Act. The net tax effect of this distribution was minimal because the ~~Act on its plan~~current tax cost at a 5.25% tax rate was offset by the benefit attributable to reducing our deferred tax liability for ~~reinvestment or repatriation of foreign earnings~~We have started an evaluation of the effects of the repatriation provision; however, we do not expect to be able to complete this evaluation until after Congress or the Treasury Department provide additional clarifying language on key elements of the provision. We have not provided for United States income taxes on ~~a cumulative total~~earnings previously provided at the statutory rate of approximately $174.7 million of undistributed earnings as of January 30, 2005 for certain non-United States subsidiaries as we intended to reinvest these earnings indefinitely in operations outside of the United States. We are currently in the process of evaluating whether or not, and to what extent, if any, this provision may benefit us. We expect to complete such evaluation before the end of our fiscal 2006. The range of possible amounts that we are considering for repatriation under this provision is between zero and $500 million. The potential range of related income tax expense is between zero and $27 million.35%.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 1415 - Microsoft Agreement

On March 5, 2000, we entered into an agreement with Microsoft Corporation, or the Microsoft Agreement, in which we agreed, under certain terms and conditions, to develop and sell processors for use in the Xbox video game console. ~~The terms of~~Under the Microsoft Agreement, ~~also state that~~ in the event that an individual or corporation makes an offer to purchase shares equal to or greater than ~~thirty percent (30%)~~30% of the outstanding shares of our common stock, Microsoft ~~has~~may have first and last rights of refusal to purchase the stock.

We were engaged with Microsoft Corporation, or Microsoft, in discussions related to pricing and volumes of the Xbox platform processors. The Microsoft Agreement contemplated the use of a third party to resolve disputed matters, and on April 23, 2002 Microsoft submitted the pricing dispute to binding arbitration. On February 6, 2003, NVIDIA and Microsoft announced that arbitration was over and the companies had settled all issues related to pricing of the Microsoft Xbox platform processors. In addition to resolving this pricing dispute, we have agreed to collaborate with Microsoft on future cost reductions for the Xbox, together the Microsoft Settlement. As a result of the Microsoft Settlement, we recorded $40.4 million in additional revenue in the fourth quarter of fiscal 2003.

Note 1516 - Segment Information

~~During the second quarter of fiscal 2005,~~

Our Chief Executive Officer, who is considered to be our chief operating decision maker, ~~the Chief Executive Officer, began reviewing~~or CODM, reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance. During the first quarter of fiscal 2006, we reorganized our operating segments to bring all major product groups in line with our strategy to position ourselves as the worldwide leader in programmable graphics processor technologies. We now report ~~three~~financial information for four product-line operating ~~segments:~~segments to our CODM: the GPU ~~business, which~~Business is composed of products that support desktop PCs, notebook PCs and professional workstations; the MCP ~~business, which~~Business is composed of NVIDIA nForce products that operate as a single-chip or chipset that can off-load system functions, such as audio processing and ~~Xbox products;~~network communications, and perform these operations independently from the ~~WMP business, which supports~~host central processing unit, or CPU; our Handheld GPU Business is composed of products that support handheld personal digital assistants, cellular phones and ~~cellular phones.~~other handheld devices; and our Consumer Electronics Business is concentrated in products that support video game consoles and other digital consumer electronics devices and is composed of revenue from our contractual arrangements with SCE to jointly develop a custom GPU incorporating our next-generation GeForce GPU and SCE’s system solutions in SCE’s PlayStation3, revenue from sales of our Xbox-related products, revenue from our license agreement with Microsoft relating to the successor product to their initial Xbox gaming console, the Xbox360, and related devices, and digital media processor products. In addition to these operating segments, we have the “All Other” category that includes human resources, legal, finance, general administration and corporate marketing expenses, which total ~~$101.4~~$123.9 million and $118.0 million for fiscal 2006 and 2005, respectively, that we do not allocate to our other operating segments. “All Other” also includes the results of operations of other miscellaneous operating segments that are neither individually reportable, nor aggregated with another operating segment. Revenue in the “All Other” category is primarily derived from sales of memory.

~~We do~~ All prior period amounts have been restated to reflect our new reporting structure.

Our CODM does not ~~identify or allocate~~review any information regarding total assets byon an operating ~~segment.~~segment basis. Operating segments do not record intersegment revenue, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for ~~our company~~NVIDIA as a whole.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~

For periods prior to the first quarter of fiscal 2005, product-line operating segment information other than revenue iswas impracticable to obtain primarily due to changes in our enterprise resource system structure that we implemented during the first quarter of fiscal 2005.

GPU

MCP

WMP

All Other

Consolidated

(In thousands)

Twelve Months Ended January 30, 2005:

Revenue $ 1,360,351 $ 424,052 $ 45,921 $ 179,709 $ 2,010,033
Operating income (loss) $ 182,045 $ 66,454 $ (37,532 ) $ (97,374 ) $ 113,593
Twelve Months Ended January 25, 2004:

Revenue $ 1,259,803 $ 442,500 $ 9,009 $ 111,633 $ 1,822,945
Twelve Months EndedJanuary 26, 2003:

Revenue $ 1,303,719 $ 498,270 $ -- $ 107,458 $ 1,909,447

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


	GPU		MCP			Handheld GPU			CE		All Other			Consolidated
											(As Restated)			(As Restated)
	(In thousands)
Twelve Months Ended January 29, 2006:

Revenue	$	1,654,397	$	352,319		$	58,745		$	170,222	$	140,004		$	2,375,687
Depreciation and amortization expense	$	33,080	$	12,092		$	12,480		$	1,552	$	30,817		$	90,021
Operating income (loss)	$	370,636	$	32,865		$	(34,922	)	$	83,881	$	(115,796	)(A)	$	336,664

Twelve Months Ended January 30, 2005:
Revenue	$	1,348,968	$	175,663		$	45,921		$	259,968	$	179,513		$	2,010,033
Depreciation and amortization expense	$	32,849	$	12,824		$	11,620		$	880	$	32,643		$	90,816
Operating income (loss)	$	178,597	$	(39,912	)	$	(37,532	)	$	107,901	$	(113,878	)(A)	$	95,176

Twelve Months Ended January 25, 2004:
Revenue	$	1,259,802	$	162,435		$	9,009		$	280,134	$	111,565		$	1,822,945

(A)

Operating loss in the “All Other” category for the fiscal years ended January 29, 2006, January 30, 2005 and January 25, 2004 includes $3,433, $18,417, and $40,369, respectively, of restated stock-based compensation and associated payroll tax expense. Please refer to Note 2 of the Notes to Consolidated Financial Statements for further information.

Revenue by geographic region is allocated to individual countries based on the location to which the products are initially billed even if our customers’ revenue is attributable to end customers that are located in a different location. The following tables summarize information pertaining to our revenue from customers based on invoicing address in different geographic regions:

Year Ended

Year Ended

Year Ended

January 30,

January 25,

January 26,

2005

2004

2003

(In thousands)

Revenue:

United States $ 473,721 $ 444,510 $ 601,952
Other Americas 11,045 6,359 1,798
China 269,306 280,975 242,908
Taiwan 883,346 834,511 862,238
Other Asia Pacific 169,888 149,843 127,796
Europe 202,727 106,747 72,755
Total revenue $ 2,010,033 $ 1,822,945 $ 1,909,447

As of

As of

January 30,

January 25,

2005

2004

(In thousands)

Long-lived assets

United States $ 169,872 $ 186,280
Other Americas -- 15
Asia Pacific 5,104 1,653
Europe 3,979 2,081
Total long-lived assets $ 178,955 $ 190,029

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)~~


	Year Ended January 29, 2006		Year Ended January 30, 2005		Year Ended January 25, 2004
	(In thousands)
Revenue:
United States	$	340,598	$	473,721	$	444,510
Other Americas		38,572		11,045		6,359
China		401,612		269,306		280,975
Taiwan		1,131,784		883,346		834,511
Other Asia Pacific		250,844		169,888		149,843
Europe		212,277		202,727		106,747

Total revenue	$	2,375,687	$	2,010,033	$	1,822,945


	January 29, 2006		January 30, 2005
	(In thousands)
Long-lived assets
United States	$	161,505	$	169,872
Other Americas		609		—
China		4,443		1,030
Taiwan		1,020		951
Other Asia Pacific		7,670		3,123
Europe		2,905		3,979

Total long-lived assets	$	178,152	$	178,955

Revenue from significant customers, those representing approximately 10% or more of total revenue for the respective ~~periods,~~dates, is summarized as follows:

Year Ended
Year Ended
Year Ended

January 30,
January 25,
January 26,

2005
2004
2003
Revenue:

Customer A 9% 12% 15%
Customer B 13% 15% 23%
Customer C 8% 12% 9%
Customer D 18% 21% 17%


	Year Ended January 29, 2006		Year Ended January 30, 2005		Year Ended January 25, 2004
Revenue:
Customer A	8	%	9	%	12	%
Customer B	5	%	13	%	15	%
Customer C	6	%	8	%	12	%
Customer D	14	%	18	%	21	%
Customer E	12	%	7	%	9	%

Accounts receivable from significant customers, those representing approximately 10% or more of total accounts receivable for the respective periods, is summarized as follows:

As of
As of

January 30,
January 25,

2005
2004
Accounts Receivable:

Customer A 13% 15%
Customer B 5% --
Customer C 9% 18%
Customer D 14% 21%


	January 29, 2006		January 30, 2005
Accounts Receivable:
Customer A	8	%	13	%
Customer B	8	%	14	%
Customer C	11	%	—	%

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 1617 - Quarterly Summary (Unaudited)

Fiscal 2005
Quarters Ended

Jan. 30, 2005

Oct. 24, 2004

July 25, 2004

April 25, 2004

(In thousands, except per share data)

Statement of Operations Data:

Revenue $ 566,476 $ 515,591 $ 456,061 $ 471,905
Cost of revenue $ 372,661 $ 348,849 $ 315,968 $ 323,069
Gross profit $ 193,815 $ 166,742 $ 140,093 $ 148,836
Net income $ 48,009 $ 25,879 $ 5,119 $ 21,349
Basic net income per share $ 0.29 $ 0.16 $ 0.03 $ 0.13
Diluted net income per share $ 0.27 $ 0.15 $ 0.03 $ 0.12

Fiscal 2004
Quarters Ended

Jan. 25, 2004

Oct. 26, 2003

July 27, 2003

April 27, 2003

(In thousands, except per share data)

Statement of Operations Data:

Revenue $ 472,119 $ 486,069 $ 459,774 $ 404,983
Cost of revenue $ 333,914 $ 351,938 $ 329,800 $ 278,415
Gross profit $ 138,205 $ 134,131 $ 129,974 $ 126,568
Net income $ 24,166 $ 6,356 $ 24,150 $ 19,747
Basic net income per share $ 0.15 $ 0.04 $ 0.15 $ 0.12
Diluted net income per share $ 0.14 $ 0.04 $ 0.14 $ 0.12

The following table sets forth our unaudited consolidated financial data as restated, for the last eight fiscal quarters ended January 29, 2006. For more information on these matters, please refer to Note 2, “Restatement of Consolidated Financial Statements, Audit Committee and Company Findings”.


	Fiscal 2006 Quarters Ended
	Jan. 29, 2006							Oct. 30, 2005							July 31, 2005							May 1, 2005
	As Previously Reported		Adjustments			As Restated		As Previously Reported		Adjustments			As Restated		As Previously Reported		Adjustments			As Restated		As Previously Reported		Adjustments			As Restated
	(In thousands, except per share data)
Statement of Operations Data:
Revenue	$	633,614	$	—		$	633,614	$	583,415	$	—		$	583,415	$	574,812	$	—		$	574,812	$	583,846	$	—		$	583,846
Cost of revenue	$	378,674	$	138		$	378,812	$	355,247	$	173		$	355,420	$	357,278	$	159		$	357,437	$	373,693	$	292		$	373,985
Gross profit	$	254,940	$	(138	)	$	254,802	$	228,168	$	(173	)	$	227,995	$	217,534	$	(159	)	$	217,375	$	210,153	$	(292	)	$	209,861
Net income	$	98,052	$	(678	)	$	97,374	$	65,253	$	(806	)	$	64,447	$	74,837	$	(1,004	)	$	73,833	$	64,444	$	1,078		$	65,522
Basic net income per share	$	0.57	$	—		$	0.57	$	0.38	$	—		$	0.38	$	0.44	$	—		$	0.44	$	0.38	$	0.01		$	0.39
Diluted net income per share	$	0.53	$	(0.01	)	$	0.52	$	0.36	$	(0.01	)	$	0.35	$	0.41	$	—		$	0.41	$	0.36	$	—		$	0.36


	Fiscal 2005 Quarters Ended
	Jan. 30, 2005							Oct. 24, 2004							July 25, 2004							April 25, 2004
	As Previously Reported		Adjustments			As Restated		As Previously Reported		Adjustments			As Restated		As Previously Reported		Adjustments			As Restated		As Previously Reported		Adjustments			As Restated
	(In thousands, except per share data)
Statement of Operations Data:
Revenue	$	566,476	$	—		$	566,476	$	515,591	$	—		$	515,591	$	456,061	$	—		$	456,061	$	471,905	$	—		$	471,905
Cost of revenue	$	372,661	$	392		$	373,053	$	348,849	$	182		$	349,031	$	315,968	$	508		$	316,476	$	323,069	$	849		$	323,918
Gross profit	$	193,815	$	(392	)	$	193,423	$	166,742	$	(182	)	$	166,560	$	140,093	$	(508	)	$	139,585	$	148,836	$	(849	)	$	147,987
Net income	$	48,009	$	(3,117	)	$	44,890	$	25,879	$	(2,378	)	$	23,501	$	5,119	$	(3,449	)	$	1,670	$	21,349	$	(2,795	)	$	18,554
Basic net income per share	$	0.29	$	(0.02	)	$	0.27	$	0.16	$	(0.02	)	$	0.14	$	0.03	$	(0.02	)	$	0.01	$	0.13	$	(0.02	)	$	0.11
Diluted net income per share	$	0.27	$	(0.02	)	$	0.25	$	0.15	$	(0.01	)	$	0.14	$	0.03	$	(0.02	)	$	0.01	$	0.12	$	(0.02	)	$	0.10

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Note 18 - Subsequent Events

ULI Electronics, Inc.On February 20, 2006, we completed the acquisition of ULi Electronics, Inc., a leading developer of core logic technology, for approximately $53 million paid in cash.

Stock Split.On March 6, 2006, we issued a press release announcing that our Board of Directors approved a two-for-one stock split of our outstanding shares of common stock to be effected in the form of a 100% stock dividend. The stock split will be effective on or about Thursday, April 6, 2006 for stockholders of record at the close of business on Friday, March 17, 2006 and will entitle each stockholder to receive one additional share for every outstanding share of common stock held. Upon the completion of the stock split, NVIDIA will have approximately 360 million shares of common stock outstanding. Had the stock split been given retroactive effect in our consolidated statements of income, the basic net income per share would have been $0.89, $0.30, and $0.23, and the diluted net income per share would have been $0.83, $0.28, and $0.22, for fiscal 2006, 2005, and 2004, respectively, on an unaudited basis.

Stock Repurchase.On March 6, 2006, we also announced that our Board of Directors approved an increase in our existing stock repurchase program. We announced a $400 million increase to the original stock repurchase program we had announced in August 2004. As a result of this increase, the amount of common stock the Board of Directors has authorized to be repurchased has now been increased to a total of $700 million. The repurchases will be made from time to time in the open market, in privately negotiated transactions, or in structured stock repurchase transactions, in compliance with the Securities and Exchange Commission Rule 10b-18, subject to market conditions, applicable legal requirements, and other factors. The program does not obligate NVIDIA to acquire any particular amount of common stock and the program may be suspended at any time at our discretion.

Note 19 - Subsequent Events Related to the Review of Stock Option Practices (Discussed in Note 2 of the Notes to Consolidated Financial Statements) (Unaudited)

Listing on The NASDAQ Stock Market

On September 11, 2006, NVIDIA filed a Form 12b-25 with the SEC to report that it would not timely file its Quarterly Report on Form 10-Q for the quarter ended July 30, 2006. On September 12, 2006 NVIDIA announced that it would request a hearing before the NASDAQ Listing Qualifications Panel, or the Panel, in response to the receipt of a NASDAQ Staff Determination letter on September 11, 2006 indicating that NVIDIA was not in compliance with the filing requirements for continued listing as set forth in Marketplace Rule 4310(c)(14). As anticipated, the letter was issued in accordance with NASDAQ procedures due to the delayed filing of NVIDIA’s Form 10-Q for the quarter ended July 30, 2006. Pending a decision by the Panel, NVIDIA shares will remain listed on the NASDAQ Global Select Stock Market. On October 19, 2006, we appeared for an oral hearing before the Panel. The Panel confirmed that our appeal had stayed the delisting action pending a final written decision by the Panel. The Panel’s decision is still pending. There can be no assurances that the Panel will grant our request for continued listing; however, by filing all of our required periodic reports with the SEC, we believe that we will have remedied our non-compliance with Marketplace Rule 4310(c)(14).

Lawsuits related to our historical stock option granting practices

Since September 29, 2006, nine derivative cases have been filed in state and federal courts asserting claims concerning errors related to our historical stock option granting practices and associated accounting for stock-based compensation expense. These complaints have been filed in various courts, including the California Superior Court, Santa Clara County, the United States District Court for the Northern District of California, and the Court of Chancery of the State of Delaware in and for New Castle County. All cases purport to be brought derivatively on behalf of NVIDIA against members of our board of directors and several of our current and former officers. The cases are not currently consolidated, although all allege in substantially similar fashion claims for, among other things, breach of fiduciary duty, unjust enrichment, insider selling, abuse of control, gross mismanagement, waste, constructive fraud, and violations of Sections 10(b) and 14(a) of the Securities Exchange Act of 1934. The plaintiffs seek to recover for NVIDIA, among other things, damages in an unspecified amount, rescission, punitive damages, treble damages for insider selling, and fees and costs. Plaintiffs also seek an accounting, a constructive trust and other equitable relief. We intend to take all appropriate action in response to these complaints.

NVIDIA CORPORATION AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

Description

Balance at Beginning of Period

Additions (3)

Deductions

Balance at End of
Period

(In thousands)

Year ended January 30, 2005
Allowance for sales returns and allowances $ 9,421 $ 22,463 $ (20,197) (1 ) $ 11,687
Allowance for doubtful accounts $ 2,310 $ (844 ) $ -- $ 1,466
Year ended January 25, 2004
Allowance for sales returns and allowances $ 13,228 $ 23,796 $ (27,603) (1 ) $ 9,421
Allowance for doubtful accounts $ 4,240 $ 731 $ (2,661) (2 ) $ 2,310
Year ended January 26, 2003
Allowance for sales returns and allowances $ 15,586 $ 20,147 $ (22,505) (1 ) $ 13,228
Allowance for doubtful accounts $ 2,493 $ 2,413 $ (666) (2 ) $ 4,240


Description	Balance at Beginning of Period		Additions (3)			Deductions			Balance at End of Period
	(In thousands)
Year ended January 29, 2006
Allowance for sales returns and allowances	$	11,687	$	35,127		$	(36,575	)(1)	$	10,239

Allowance for doubtful accounts	$	1,466	$	(492	)	$	(376	)(2)	$	598

Year ended January 30, 2005
Allowance for sales returns and allowances	$	9,421	$	22,463		$	(20,197	)(1)	$	11,687

Allowance for doubtful accounts	$	2,310	$	(844	)	$	—		$	1,466

Year ended January 25, 2004
Allowance for sales returns and allowances	$	13,228	$	23,796		$	(27,603	)(1)	$	9,421

Allowance for doubtful accounts	$	4,240	$	731		$	(2,661	)(2)	$	2,310

(1)	Represents amounts written off against the allowance for sales returns.

(2)	Represents uncollectible accounts written off against the allowance for doubtful accounts.

(3)	Allowances for sales returns are charged as a reduction to revenue. Allowances for doubtful accounts are charged to expenses.

~~______________________________~~

~~(1) Represents amounts written off against the allowance for sales returns.~~

~~(2) Represents uncollectible accounts written off against the allowance for doubtful accounts.~~

~~(3) Allowances for sales returns are charged as a reduction to revenue. Allowances for doubtful accounts are charged to expenses.~~

EXHIBIT INDEX

Exhibit No.

Exhibit Description

Form

File Number

Exhibit

Filing
Date

Filed

Herewith

2.1

Asset Purchase Agreement, dated as of December 15, 2000, by and among NVIDIA Corporation, NVIDIA US Investment Company and 3dfx Interactive, Inc.

10-K

0-23985

2.1

4/27/01

3.1

Amended and Restated Certificate of Incorporation

S-8

333-74905

4.1

3/23/99

3.2

Certificate of Amendment of Amended and Restated Certificate of Incorporation

10-Q

0-23985

3.4

9/10/02

3.3

Bylaws of NVIDIA Corporation, Amended and Restated as of March 7, 2006

10-K

0-23985

3.3

3/16/06

4.1

Reference is made to Exhibits 3.1, 3.2 and 3.3

4.2

Specimen Stock Certificate

S-1

333-47495

4.2

4/24/98

4.3

Second Amended and Restated Investors’ Rights Agreement, dated August 19, 1997 between the Company and the parties indicated thereto and First Amendment to Second Amended and Restated Investors’ Rights Agreement, dated July 22, 1998

S-1

333-47495

4.3

11/20/98

4.4

Second Amendment to Second Amended and Restated Investors’ Rights Agreement, dated April 12, 1999

10-Q

0-23985

4.4

6/15/99

10.1

Form of Indemnity Agreement between NVIDIA Corporation and each of its directors and officers

8-K

0-23985

3/7/06

10.2+

1998 Equity Incentive Plan, as amended

8-K

0-23985

10.2

3/13/06

10.3+

1998 Equity Incentive Plan ISO, as amended

10-Q

0-23985

10.5

11/22/04

10.4+

1998 Equity Incentive Plan NSO, as amended

10-Q

0-23985

10.6

11/22/04

10.5+

Certificate of Stock Option Grant

10-Q

0-23985

10.7

11/22/04

10.6+

1998 Employee Stock Purchase Plan, as amended

S-8

333-51520

99.4

12/8/00

10.7+

Form of Employee Stock Purchase Plan Offering, as amended

S-8

333-100010

99.5

9/23/02

10.8+

Form of Employee Stock Purchase Plan Offering, as amended - International Employees

S-8

333-100010

99.6

9/23/02

10.9+

1998 Non-Employee Directors’ Stock Option Plan, as amended

10-Q/A

0-23985

10.7

7/03/02

EXHIBIT INDEX

(CONTINUED)

Exhibit No.

Exhibit Description

Form

File Number

Exhibit

Filing
Date

Filed
Herewith

10.10+

1998 Non-Employee Directors’ Stock Option Plan (Annual Grant - Board Service), as amended

10-Q

0-23985

10.1

11/22/04

10.11+

1998 Non-Employee Directors’ Stock Option Plan (Committee Grant - Committee Service), as amended

10-Q

0-23985

10.2

11/22/04

10.12+

1998 Non-Employee Directors’ Stock Option Plan (Initial Grant)

10-Q

0-23985

10.3

11/22/04

10.13+

2000 Nonstatutory Equity Incentive Plan, as amended

10-K

0-23985

10.11

4/25/03

10.14

Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building A

S-3/A #1

333-33560

10.1

4/20/00

10.15

Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building B

S-3/A #1

333-33560

10.2

4/20/00

10.16

Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building C

S-3/A #1

333-33560

10.3

4/20/00

10.17

Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building D

S-3/A #1

333-33560

10.4

4/20/00

10.18+

NVIDIA Corporation Fiscal Year 2006 Variable Compensation Plan

8-K

0-23985

10.1

5/13/06

21.1

List of Registrant’s Subsidiaries

10-K

0-23985

21.1

3/16/06

23.1

Consent of PricewaterhouseCoopers LLP

23.2

Consent of KPMG LLP

24.1

Power of Attorney

10-K

0-23985

3/16/06

31.1

Rule 13a-14(a) Certification of Chief Executive Office

31.2

Rule 13a-14(a) Certification of the Chief Financial Officer

32.1#

Statement of the Chief Executive Officer under Rule 13a - 14(b) (18 U.S.C Section 1350)

32.2#

Statement of the Chief Financial Officer under Rule 13a - 14(b) (18 U.S.C Section 1350)

99.1

Selected Consolidated Financial Data

~~Exhibit Number~~

~~Description~~Management contract, compensatory plan or arrangement.

#	In accordance with Item 601(b)(32)(ii) of ~~Document~~

~~2.1~~	~~Asset Purchase Agreement, dated as~~Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of ~~December 15, 2000,~~Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-K/A and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by ~~and among NVIDIA Corporation, NVIDIA US Investment Company and 3dfx Interactive, Inc. (filed as Exhibit 2.1~~reference into any filing under the Securities Act or the Exchange Act, except to the ~~Company’s Annual Report on Form 10-K for~~extent that the ~~year ended January 28, 2001 and incorporated herein~~registrant specifically incorporates it by ~~reference).~~
~~3.1~~	~~Amended and Restated Certificate of Incorporation (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (File No. 333-74905) and incorporated herein by reference).~~
~~3.2~~	Certificate of Amendment of Amended and Restated Certificate of Incorporation (filed as Exhibit 3.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2002 and incorporated herein by reference).
~~3.3~~	~~Bylaws, as amended (filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended July 29, 2001 and incorporated herein by reference).~~
~~4.1~~	~~Reference is made to Exhibits 3.1 and 3.2.~~
~~4.2~~	~~Specimen Stock Certificate (filed as Exhibit 4.2 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-47495) and incorporated herein by reference).~~
~~4.3~~	Second Amended and Restated Investors’ Rights Agreement, dated August 19, 1997 between the Company and the parties indicated thereto and First Amendment to Second Amended and Restated Investors’ Rights Agreement, dated July 22, 1998 (filed as Exhibit 4.3 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-47495) and incorporated herein by reference).
~~4.4~~	Second Amendment to Second Amended and Restated Investors’ Rights Agreement, dated April 12, 1999 (filed as Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended May 2, 1999 and incorporated herein by reference).
~~10.1~~	Form of Indemnity Agreement between NVIDIA Corporation and each of its directors and officers (filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1 File No. 333-47495) and incorporated herein by reference).
~~10.2*+~~	~~1998 Equity Incentive Plan, as amended.~~
~~10.3 +~~	1998 Equity Incentive Plan ISO, as amended (filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference).
~~10.4+~~	1998 Equity Incentive Plan NSO, as amended (filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference).
~~10.5 +~~	~~Certificate of Stock Option Grant (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference).~~
~~10.6+~~	~~1998 Employee Stock Purchase Plan, as amended (filed as Exhibit 99.4 to the Company’s Registration Statement on Form S-8 (File No. 333-51520) and incorporated herein by reference).~~
~~10.7+~~	~~Form of Employee Stock Purchase Plan Offering, as amended (filed as Exhibit 99.5 to the Company’s Registration Statement on Form S-8 (File No. 333-100010) and incorporated herein by reference).~~
~~10.8+~~	1998 Non-Employee Directors’ Stock Option Plan, as amended (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q/A for the quarterly period ended April 28, 2002 and incorporated herein by reference).
~~10.9 +~~	1998 Non-Employee Directors’ Stock Option Plan (Annual Grant - Board Service), as amended (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference). reference.

~~Exhibit Number~~	~~Description of Document~~
~~10.10+~~	1998 Non-Employee Directors’ Stock Option Plan (Committee Grant - Committee Service), as amended (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated Copies of above exhibits not contained herein ~~by reference).~~
~~10.11+~~	1998 Non-Employee Directors’ Stock Option Plan (Initial Grant) (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference).
~~10.12+~~	~~2000 Nonstatutory Equity Incentive Plan, as amended (filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended January 26, 2003 and incorporated herein by reference).~~
~~10.13~~	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building A (filed as Exhibit 10.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-3 (File No. 333-33560) and incorporated herein by reference).
~~10.14~~	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building B (filed as Exhibit 10.2 to Amendment No. 1 to the Company’s Registration Statement on Form S-3 (File No. 333-33560) and incorporated herein by reference).
~~10.15~~	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building C (filed as Exhibit 10.3 to Amendment No. 1 to the Company’s Registration Statement on Form S-3 (File No. 333-33560) and incorporated herein by reference).
~~10.16~~	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building C (filed as Exhibit 10.4 to Amendment No. 1 to the Company’s Registration Statement on Form S-3 (File No. 333-33560) and incorporated herein by reference).
21.1*	~~List of Registrant’s Subsidiaries.~~
23.1*	~~Consent of PricewaterhouseCoopers LLP.~~
23.2*	~~Consent of KPMG LLP.~~
24.1*	~~Power of Attorney (included in signature page).~~
31.1*	~~Certification of the Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.~~
31.2*	~~Certification of the Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.~~
~~32.1*#~~	~~Certification of the Chief Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934.~~
~~32.2*#~~	~~Certification of the Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934.~~

* Filed herewith.

~~+ Management contract, compensatory plan or arrangement.~~

~~# The certifications attached as Exhibit 32.1 and Exhibit 32.2 accompany this Annual Report on Form 10-K,~~ are ~~not deemed filed with the Securities and Exchange Commission and are not~~available to ~~be incorporated by reference into~~ any ~~filing of~~stockholder upon written request to: Investor Relations: NVIDIA Corporation, under the Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing.

2701 San Tomas Expressway, Santa Clara, CA 95050.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~March 22, 2005.~~November 29, 2006.


NVIDIA Corporation

By		/s/ JEN-HSUN HUANG
		Jen-Hsun Huang
		President and Chief Executive Officer

~~NVIDIA Corporation~~

By ~~/s/ JEN-HSUN HUANG_______~~

~~Jen-Hsun Huang~~

~~President and Chief Executive Officer~~

~~POWER OF ATTORNEY~~

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jen-Hsun Huang and Marvin D. Burkett, and each or any one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including posting effective amendments) to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-facts and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

~~Signature~~	~~Title~~	~~Date~~
Signature		Title		Date
/s/ JEN-HSUN HUANG Jen-Hsun Huang		President, Chief Executive Officer
~~/s/ JEN-HSUN HUANG~~	and Director (Principal Executive
~~Jen-Hsun Huang~~	Officer)	~~March 22, 2005~~
		November 29, 2006

/s/ MARVIN D. BURKETT Marvin D. Burkett		Chief Financial Officer (Principal
~~Marvin D. Burkett~~	Financial and Accounting Officer)	~~March 22, 2005~~	November 29, 2006

/s/ TENCH COXE* Tench Coxe
Director		November 29, 2006

/s/ ~~TENCH COXE~~STEVEN CHU* Steven Chu
~~Tench Coxe~~	Director	~~March 22, 2005~~
		November 29, 2006

~~/s/ STEVEN CHU~~
~~Steven Chu~~	~~Director~~	~~March 17, 2005~~


/s/ JAMES C. ~~GAITHER~~GAITHER* James C. Gaither
~~James C. Gaither~~	Director	~~March 22, 2005~~
		November 29, 2006

/s/ HARVEY C. ~~JONES~~		~~March 21, 2005~~
JONES* Harvey C. Jones		Director

~~Signature~~	~~Title~~	~~Date~~ November 29, 2006

/s/ MARK L. PERRY* Mark L. Perry
Director		November 29, 2006

/s/ WILLIAM J. ~~MILLER~~MILLER* William J. Miller
~~William J. Miller~~	Director	~~March 21, 2005~~
		November 29, 2006

/s/ A. BROOKE ~~SEAWELL~~SEAWELL* A. Brooke Seawell
~~A. Brooke Seawell~~	Director	~~March 22, 2005~~
		November 29, 2006



*By:		/s/ JEN-HSUN HUANG
~~/s/ MARK A. STEVENS~~
~~Mark A. Stevens~~	~~Director~~	~~March 22, 2005~~
		Jen-Hsun Huang Attorney-In-Fact

EXHIBIT INDEX

Exhibit
No.

Exhibit Description

Form

File

Number

Exhibit

Filing
Date

Filed

Herewith

2.1

Asset Purchase Agreement, dated as of December 15, 2000, by and among NVIDIA Corporation, NVIDIA US Investment Company and 3dfx Interactive, Inc.

10-K

0-23985

2.1

4/27/01

3.1

Amended and Restated Certificate of Incorporation

S-8

333-74905

4.1

3/23/99

3.2

Certificate of Amendment of Amended and Restated Certificate of Incorporation

10-Q

0-23985

3.4

9/10/02

3.3

Bylaws of NVIDIA Corporation, Amended and Restated as of March 7, 2006

10-K

0-23985

3.3

3/16/06

4.1

Reference is made to Exhibits 3.1, 3.2 and 3.3

4.2

Specimen Stock Certificate

S-1

333-47495

4.2

4/24/98

4.3

S-1

333-47495

4.3

11/20/98

4.4

Second Amendment to Second Amended and Restated Investors’ Rights Agreement, dated April 12, 1999

10-Q

0-23985

4.4

6/15/99

10.1

Form of Indemnity Agreement between NVIDIA Corporation and each of its directors and officers

8-K

0-23985

3/7/06

10.2+

1998 Equity Incentive Plan, as amended

8-K

0-23985

10.2

3/13/06

10.3+

1998 Equity Incentive Plan ISO, as amended

10-Q

0-23985

10.5

11/22/04

10.4+

1998 Equity Incentive Plan NSO, as amended

10-Q

0-23985

10.6

11/22/04

10.5+

Certificate of Stock Option Grant

10-Q

0-23985

10.7

11/22/04

10.6+

1998 Employee Stock Purchase Plan, as amended

S-8

333-51520

99.4

12/8/00

10.7+

Form of Employee Stock Purchase Plan Offering, as amended

S-8

333-100010

99.5

9/23/02

10.8+

Form of Employee Stock Purchase Plan Offering, as amended - International Employees

S-8

333-100010

99.6

9/23/02

10.9+

1998 Non-Employee Directors’ Stock Option Plan, as amended

10-Q/A

0-23985

10.7

7/03/02

EXHIBIT INDEX

(CONTINUED)

Exhibit
No.

Exhibit Description

Form

File

Number

Exhibit

Filing
Date

Filed
Herewith

10.10+

1998 Non-Employee Directors’ Stock Option Plan (Annual Grant - Board Service), as amended

10-Q

0-23985

10.1

11/22/04

10.11+

1998 Non-Employee Directors’ Stock Option Plan (Committee Grant - Committee Service), as amended

10-Q

0-23985

10.2

11/22/04

10.12+

1998 Non-Employee Directors’ Stock Option Plan (Initial Grant)

10-Q

0-23985

10.3

11/22/04

10.13+

2000 Nonstatutory Equity Incentive Plan, as amended

10-K

0-23985

10.11

4/25/03

10.14

Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building A

S-3/A #1

333-33560

10.1

4/20/00

10.15

Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building B

S-3/A #1

333-33560

10.2

4/20/00

10.16

Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building C

S-3/A #1

333-33560

10.3

4/20/00

10.17

Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building D

S-3/A #1

333-33560

10.4

4/20/00

10.18+

NVIDIA Corporation Fiscal Year 2006 Variable Compensation Plan

8-K

0-23985

10.1

5/13/06

21.1

List of Registrant’s Subsidiaries

10-K

0-23985

21.1

3/16/06

23.1

Consent of PricewaterhouseCoopers LLP

10-K

0-23985

23.1

23.2

Consent of KPMG LLP

10-K

0-23985

23.2

24.1

Power of Attorney

10-K

0-23985

3/16/06

31.1

Rule 13a-14(a) Certification of Chief Executive Officer

31.2

Rule 13a-14(a) Certification of the Chief Financial Officer

32.1#

Statement of the Chief Executive Officer under Rule 13a - 14(b) (18 U.S.C Section 1350)

32.2#

Statement of the Chief Financial Officer under Rule 13a - 14(b) (18 U.S.C Section 1350)

99.1

Selected Consolidated Financial Data

~~Exhibit Number~~

~~Description~~Management contract, compensatory plan or arrangement.

#	In accordance with Item 601(b)(32)(ii) of ~~Document~~

~~2.1~~	~~Asset Purchase Agreement, dated as~~Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of ~~December 15, 2000,~~Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-K/A and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by ~~and among NVIDIA Corporation, NVIDIA US Investment Company and 3dfx Interactive, Inc. (filed as Exhibit 2.1~~reference into any filing under the Securities Act or the Exchange Act, except to the ~~Company’s Annual Report on Form 10-K for~~extent that the ~~year ended January 28, 2001 and incorporated herein~~registrant specifically incorporates it by ~~reference).~~
~~3.1~~	~~Amended and Restated Certificate of Incorporation (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (File No. 333-74905) and incorporated herein by reference).~~
~~3.2~~	Certificate of Amendment of Amended and Restated Certificate of Incorporation (filed as Exhibit 3.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended July 28, 2002 and incorporated herein by reference).
~~3.3~~	~~Bylaws, as amended (filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended July 29, 2001 and incorporated herein by reference).~~
~~4.1~~	~~Reference is made to Exhibits 3.1 and 3.2.~~
~~4.2~~	~~Specimen Stock Certificate (filed as Exhibit 4.2 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-47495) and incorporated herein by reference).~~
~~4.3~~	Second Amended and Restated Investors’ Rights Agreement, dated August 19, 1997 between the Company and the parties indicated thereto and First Amendment to Second Amended and Restated Investors’ Rights Agreement, dated July 22, 1998 (filed as Exhibit 4.3 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-47495) and incorporated herein by reference).
~~4.4~~	Second Amendment to Second Amended and Restated Investors’ Rights Agreement, dated April 12, 1999 (filed as Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended May 2, 1999 and incorporated herein by reference).
~~10.1~~	Form of Indemnity Agreement between NVIDIA Corporation and each of its directors and officers (filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1 File No. 333-47495) and incorporated herein by reference).
~~10.2*+~~	~~1998 Equity Incentive Plan, as amended.~~
~~10.3 +~~	1998 Equity Incentive Plan ISO, as amended (filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference).
~~10.4+~~	1998 Equity Incentive Plan NSO, as amended (filed as Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference).
~~10.5 +~~	~~Certificate of Stock Option Grant (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference).~~
~~10.6+~~	~~1998 Employee Stock Purchase Plan, as amended (filed as Exhibit 99.4 to the Company’s Registration Statement on Form S-8 (File No. 333-51520) and incorporated herein by reference).~~
~~10.7+~~	~~Form of Employee Stock Purchase Plan Offering, as amended (filed as Exhibit 99.5 to the Company’s Registration Statement on Form S-8 (File No. 333-100010) and incorporated herein by reference).~~
~~10.8+~~	1998 Non-Employee Directors’ Stock Option Plan, as amended (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q/A for the quarterly period ended April 28, 2002 and incorporated herein by reference).
~~10.9 +~~	1998 Non-Employee Directors’ Stock Option Plan (Annual Grant - Board Service), as amended (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference). reference.

~~Exhibit Number~~	~~Description of Document~~
~~10.10+~~	1998 Non-Employee Directors’ Stock Option Plan (Committee Grant - Committee Service), as amended (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated Copies of above exhibits not contained herein ~~by reference).~~
~~10.11+~~	1998 Non-Employee Directors’ Stock Option Plan (Initial Grant) (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 23, 2004 and incorporated herein by reference).
~~10.12+~~	~~2000 Nonstatutory Equity Incentive Plan, as amended (filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended January 26, 2003 and incorporated herein by reference).~~
~~10.13~~	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building A (filed as Exhibit 10.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-3 (File No. 333-33560) and incorporated herein by reference).
~~10.14~~	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building B (filed as Exhibit 10.2 to Amendment No. 1 to the Company’s Registration Statement on Form S-3 (File No. 333-33560) and incorporated herein by reference).
~~10.15~~	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building C (filed as Exhibit 10.3 to Amendment No. 1 to the Company’s Registration Statement on Form S-3 (File No. 333-33560) and incorporated herein by reference).
~~10.16~~	Lease dated April 4, 2000 between NVIDIA Corporation and Sobrato Interests III for Building C (filed as Exhibit 10.4 to Amendment No. 1 to the Company’s Registration Statement on Form S-3 (File No. 333-33560) and incorporated herein by reference).
21.1*	~~List of Registrant’s Subsidiaries.~~
23.1*	~~Consent of PricewaterhouseCoopers LLP.~~
23.2*	~~Consent of KPMG LLP.~~
24.1*	~~Power of Attorney (included in signature page).~~
31.1*	~~Certification of the Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.~~
31.2*	~~Certification of the Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934.~~
~~32.1*#~~	~~Certification of the Chief Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934.~~
~~32.2*#~~	~~Certification of the Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934.~~

* Filed herewith.

~~+ Management contract, compensatory plan or arrangement.~~

2701 San Tomas Expressway, Santa Clara, CA 95050.

~~Delaware~~	~~94-3177549~~
Delaware		94-3177549
(State or Other Jurisdiction of	~~(I.R.S. Employer~~
Incorporation or Organization)		(I.R.S. Employer Identification No.)


Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $.001 par value per share		The NASDAQ Stock Market LLC (NASDAQ Global Market)


				Page
	~~PART I~~
~~Item 1.~~ PART I	~~Business~~	1
~~Item 2.~~	~~Properties~~		10
Item 3. 1.	~~Legal Proceedings~~	10 Business		1

Item 1A.		Risk Factors		12

Item 1B.		Unresolved Staff Comments		28

Item 2.		Properties		28

Item 3.		Legal Proceedings		29

Item 4.		Submission of Matters to a Vote of Security Holders	11
		30
	~~PART II~~
		PART II

Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer ~~Repurchases~~Purchases of Equity Securities	12	31

Item 6.		Selected Financial Data	13	33

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	15	35

Item ~~7a.~~7A.		Quantitative and Qualitative Disclosures about Market Risk	45	56

Item 8.		Consolidated Financial Statements and Supplementary Data	45	57

Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45	57

Item ~~9a.~~9A.		Controls and Procedures	45
~~Item 9b.~~	~~Other Information~~	46
		57
	~~PART III~~
Item 9B.		Other Information		62

		PART III

Item 10.		Directors and Executive Officers of the Registrant	47	62
~~Item 11.~~	~~Executive Compensation~~		47
Item 11.		Executive Compensation		63

Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47	63

Item 13.		Certain Relationships and Related Transactions	47	63

Item 14.		Principal Accounting Fees and Services	47
		63
	~~PART IV~~
		PART IV

Item 15.		Exhibits, Financial Statement Schedules	48
~~Signatures~~		87 64

Signatures				109

~~Name~~	~~Age~~
Name		Age	Position
Jen-Hsun Huang	41	42	President, Chief Executive Officer and Director
Marvin D. Burkett	62	63	Chief Financial Officer
~~Jeffrey D. Fisher~~Ajay K. Puri	46	~~Executive~~51	Senior Vice President, Worldwide Sales
Jeffrey D. Fisher		47	Senior Vice President, GPU Business Unit
David M. Shannon	49	50	Senior Vice President, General Counsel
~~Di Ma~~	52	~~Vice President, Operations~~ and Secretary
Daniel F. Vivoli	44	~~Executive~~45	Senior Vice President, Marketing

	High	Low
Year ended January 29, 2006
First Quarter (through March 4, 2005)	$29.60	$22.60

Year ended January 30, 2005
Fourth Quarter	$24.96	$13.14
Third Quarter	$15.89	$9.30
Second Quarter	$24.11	$14.40
First Quarter	$27.35	$20.63

Year ended January 25, 2004
Fourth Quarter	$25.88	$17.08
Third Quarter	$21.47	$15.26
Second Quarter	$27.75	$13.55
First Quarter	$14.83	$9.33


	High		Low
Year ended January 28, 2007
First Quarter (through March 3, 2006)	$	50.72	$	42.87

Year ended January 29, 2006
Fourth Quarter	$	46.76	$	32.55
Third Quarter	$	35.95	$	27.04
Second Quarter	$	29.39	$	21.52
First Quarter	$	29.60	$	20.92

Year ended January 30, 2005
Fourth Quarter	$	24.96	$	13.14
Third Quarter	$	15.89	$	9.30
Second Quarter	$	24.11	$	14.40
First Quarter	$	27.35	$	20.63

Period	Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans of Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

July 26, 2004 through August 22, 2004		1,075,000	$	10.57			1,075,000	$	288,642,283

August 23, 2004 through September 19, 2004		819,253	$	12.83			819,253	$	278,133,053

September 20, 2004 through October 24, 2004		190,100	$	14.61			190,100	$	275,356,213

Total		2,084,353	$	11.82 (1	)		2,084,353


Period	Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
October 31, 2005 through November 27, 2005	—		$	—		—		$	136,846,554
November 28, 2005 through December 25, 2005	—		$	—		—		$	136,846,554
December 26, 2005 through January 29, 2006	1,355,260	(3)	$	36.89		1,355,260	(3)	$	86,846,554

Total	1,355,260		$	36.89	(2)	1,355,260


	Year Ended
	January 29, 2006 (A)		January 30, 2005		January 25, 2004 (B, C)		January 26, 2003 (D, E)		January 27, 2002 (F, G)
	(As Restated)(H)		(As Restated)(H)		(As Restated)(H)		(As Restated)(H)		(As Restated)(H)
	(in thousands, except per share data)
Consolidated Statement of Income Data:
Revenue	$	2,375,687	$	2,010,033	$	1,822,945	$	1,909,447	$	1,369,471
Income from operations	$	336,664	$	95,176	$	49,788	$	82,201	$	188,732
Net income	$	301,176	$	88,615	$	48,630	$	50,901	$	142,401
Basic net income per share	$	1.77	$	0.53	$	0.30	$	0.33	$	1.00
Diluted net income per share	$	1.65	$	0.50	$	0.28	$	0.31	$	0.84
Shares used in basic per share computation		169,690		166,062		160,924		153,513		143,015
Shares used in diluted per share computation		182,852		175,812		172,054		165,827		169,813

	Year Ended
	January 30,		January 25,		January 26,		January 27,		January 28,
	2005		2004 (A, B)		2003 (C, D)		2002 (E, F)		2001
	(in thousands, except per share data)
Consolidated Statement of Income Data:
Revenue	$	2,010,033	$	1,822,945	$	1,909,447	$	1,369,471	$	735,264
Gross profit	$	649,486	$	528,878	$	576,012	$	519,238	$	272,879
Income from operations	$	113,593	$	90,157	$	143,986	$	241,732	$	128,135
Income before income tax expense	$	125,445	$	86,673	$	150,557	$	252,749	$	144,808
Income tax expense	$	25,089	$	12,254	$	59,758	$	75,825	$	46,339
Net income	$	100,356	$	74,419	$	90,799	$	176,924	$	98,469
Basic net income per share	$	0.60	$	0.46	$	0.59	$	1.24	$	0.75
Diluted net income per share	$	0.57	$	0.43	$	0.54	$	1.03	$	0.62
Shares used in basic per share computation		166,062		160,924		153,513		143,015		130,998
Shares used in diluted per share computation		176,558		172,707		168,393		171,074		159,294


	Year Ended						$ Change			% Change		Year Ended						$ Change			% Change
	Jan. 29, 2006			Jan. 30, 2005								Jan. 30, 2005			Jan. 25, 2004
	(As Restated)			(As Restated)								(As Restated)			(As Restated)
	(in millions)
Research and Development:
Salaries and benefits	$	206.0		$	173.6		$	32.4		19	%	$	173.6		$	137.6		$	36.0		26	%
Computer software and lab equipment		46.4			41.1			5.3		13	%		41.1			36.9			4.2		11	%

New product development		28.6			29.0			(0.4	)	(1	)%		29.0			18.6			10.4		56	%
Facility expense		32.0			31.4			0.6		2	%		31.4			28.3			3.1		11	%
Depreciation and amortization		58.2			56.1			2.1		4	%		56.1			44.6			11.5		26	%
License and development project costs		(28.9	)		(2.0	)		(26.9	)	(1,345	)%		(2.0	)		—			(2.0	)	—
Stock-based compensation		5.0			13.1			(8.1	)	(62	)%		13.1			22.2			(9.1	)	(41	)%
Other		9.8			5.9			3.9		66	%		5.9			4.0			1.9		48	%

Total	$	357.1		$	348.2		$	8.9		3	%	$	348.2		$	292.2		$	56.0		19	%

Research and development as a percentage of net revenue		15	%		17	%							17	%		16	%

	Year Ended											Year Ended
	Jan. 30,			Jan. 25,			$		%			Jan. 25,			Jan. 26,			$			%
	2005			2004			Change		Change			2004			2003			Change			Change
	(in thousands)

Research and Development:
Salaries and related benefits	$	171.6		$	137.6		$	34.0		25	%	$	137.6		$	104.4		$	33.2			32	%
Computer software and lab equipment		41.1			36.9			4.2		11	%		36.9			33.4			3.5			11	%
New product development		29.0			18.6			10.4		56	%		18.6			29.0			(10.4	)		(36	%)
Facility expense		31.4			28.3			3.1		11	%		28.3			26.3			2.0			8	%
Depreciation and amortization		56.1			44.6			11.5		26	%		44.6			26.9			17.7			66	%
Other		5.9			4.0			1.9		48	%		4.0			4.9			(0.9	)		(18	%)
Total	$	335.1		$	270.0		$	65.1		24	%	$	270.0		$	224.9		$	45.1			20	%
Research and development as a percentage of net revenue		17	%		15	%							15	%		12	%

Contractual Obligations	Total		Within 1 Year		2-3 Years		4-5 Years		After 5 Years
	(in thousands)
Capital lease obligations, including interest	$	869	$	869	$	--	$	--	$	--
Operating leases		191,117		27,534		54,847		52,942		55,794
Purchase obligations (1)		457,273		457,273		--		--		--
Other liabilities reflected on our balance sheet under GAAP		4,375		2,000		2,375		--		--
Total contractual obligations	$	653,634	$	487,676	$	57,222	$	52,942	$	55,794

															Accumulated
															Other								Total
						Additional			Deferred						Compre-					Total Stock-			Compre-
	Common Stock					Paid in			Compen-			Treasury			hensive			Retained		holders’			hensive
	Shares			Amount		Capital			sation			Stock			Income (Loss)			Earnings		Equity			Income

Balances, January 27, 2002		149,553,130		$	150	$	456,621			--			--		$	108		$	306,940	$	763,819
Issuance of common stock from stock plans		4,421,823			4		25,483			--			--			--			--		25,487
Stock option exchange offer		3,815,069			4		39,902			--			--			--			--		39,906
Tax benefit from stock plans		--			--		9,180			--			--			--			--		9,180
Deferred compensation		--			--		--			(156	)		--			--			--		(156	)
Unrealized gain		--			--		--			--			--			5,742			--		5,742			5,742
Tax effect of unrealized gain		--			--		--			--			--			(2,297	)		--		(2,297	)		(2,297	)
Cumulative translation adjustments		--			--		--			--			--			207			--		207			207
Net income		--			--		--			--			--			--			90,799		90,799			90,799
Balances, January 26, 2003		157,790,022			158		531,186			(156	)		--			3,760			397,739		932,687			94,451
Issuance of common stock from stock plans		6,355,765			6		37,667			--			--			--			--		37,673
Tax benefit from stock plans		--			--		8,488			--			--			--			--		8,488
Deferred compensation		--			--		6,140			(5,984	)		--			--			--		156
Amortization of deferred compensation		--			--		--			672			--			--			--		672
Unrealized loss		--			--		--			--			--			(4,850	)		--		(4,850	)		(4,850	)
Tax effect of unrealized loss		--			--		--			--			--			1,940			--		1,940			1,940
Reclassification adjustment for net gains included in net income		--			--		--			--			--			--			--		--			(3,159	)
Tax effect of reclassification adjustment for net gains included in net income		--			--		--			--			--			--			--		--			632
Net income		--			--		--			--			--			--			74,419		74,419			74,419
Balances, January 25, 2004		164,145,787			164		583,481			(5,468	)		--			850			472,158		1,051,185			68,982
Issuance of common stock from stock plans		5,028,111			5		42,497			--			--			--			--		42,502
Stock repurchase		(2,084,353	)		--		--			--			(24,644	)		--			--		(24,644	)
Tax benefit from stock plans		--			--		11,845			--			--			--			--		11,845
Deferred compensation		--			--		(1,205	)		1,205			--			--			--		--
Amortization of deferred compensation		--			--		--			1,337			--			--			--		1,337
Unrealized loss		--			--		--			--			--			(5,938	)		--		(5,938	)		(5,938	)
Tax effect of unrealized loss		--			--		--			--			--			1,470			--		1,470			1,470
Reclassification adjustment for net losses included in net income		--			--		--			--			--			193			--		193			193
Tax effect of reclassification adjustment for net losses included in net income		--			--		--			--			--			(38	)		--		(38	)		(38	)
Net income		--			--		--			--			--			--			100,356		100,356			100,356
Balances, January 30, 2005		167,089,545		$	169	$	636,618		$	(2,926	)	$	(24,644	)	$	(3,463	)	$	572,514	$	1,178,268		$	96,043

Other non-cash activities:
Acquisition of business - goodwill adjustment		($1,091	)	$	--		$	--
Assets recorded under capital lease arrangements	$	--		$	2,528		$	--
Application of customer advance to accounts receivable	$	(11,508	)	$	(46,866	)	$	(11,797	)
Marketable security received from investment exchange	$	688		$	--		$	--
Asset retirement obligation	$	4,483		$	--		$	--
Unrealized gains (losses) from marketable securities	$	(5,745	)	$	(4,850	)	$	5,742
Deferred stock-based compensation	$	(1,205	)	$	6,140		$	--

	Fair Market Value		Straight-Line Amortization Period
	(In thousands)		(Years)

Property and equipment	$	2,433		1-2
Trademarks		11,310		5
Goodwill		60,418		--
Total	$	74,161

	Year Ended							Year Ended
	January 30, 2005							January 25, 2004
	Gross CarryingAmount		AccumulatedAmortization			Net CarryingAmount		Gross CarryingAmount		AccumulatedAmortization			Net CarryingAmount
	(In thousands)

Technology licenses	$	17,236	$	(9,841	)	$	7,395	$	15,178	$	(7,161	)	$	8,017
Patents		23,260		(15,400	)		7,860		19,319		(8,992	)		10,327
Acquired intellectual property		27,086		(18,578	)		8,508		27,067		(10,590	)		16,477
Trademarks		11,310		(8,544	)		2,766		11,310		(6,283	)		5,027
Other		1,494		(509	)		985		250		(135	)		115
Total intangible assets	$	80,386	$	(52,872	)	$	27,514	$	73,124	$	(33,161	)	$	39,963

	January 30, 2005
	Amortized Cost		Unrealized Gain		Unrealized (Loss)			Estimated Fair Value
	(In thousands)
Publicly traded equity securities	$	687	$	220		--		$	907
Asset-backed securities		177,771		1		(1,786	)		175,986
Commercial paper		7,854		--		--			7,854
Obligations of the United States government & its agencies		104,768		--		(895	)		103,873
United States corporate notes, bonds and obligations		182,688		6		(1,874	)		180,820
Money market		164,377		--		--			164,377
Total	$	638,145	$	227	$	(4,555	)	$	633,817

Classified as:
Cash equivalents								$	172,284
Marketable securities									461,533
Total								$	633,817

	Less than 12 months					12 months or greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(In thousands)
Asset-backed securities	$	167,468	$	(1,661	)	$	7,015	$	(125	)	$	174,483	$	(1,786	)
Commercial paper		--		--			--		--			--		--
Obligations of the United States government & its agencies		102,864		(895	)		--		--			102,864		(895	)
United States corporate notes, bonds and obligations		165,884		(1,862	)		4,127		(12	)		170,011		(1,874	)
Money market		--		--			--		--			--		--
Total	$	436,216	$	(4,418	)	$	11,142	$	(137	)	$	447,358	$	(4,555	)

	January 30, 2005				January 25, 2004
	AmortizedCost		EstimatedFair Value		AmortizedCost		EstimatedFair Value
	(In thousands)
Less than one year	$	198,242	$	197,844	$	282,762	$	283,123
Due in 1 - 5 years		416,085		412,141		315,400		316,456
Due in 6-7 years		23,132		22,925		--		--
Total	$	637,459	$	632,910	$	598,162	$	599,579

	January 30,		January 25,
Inventories:	2005		2004
	(In thousands)
Raw materials	$	23,225	$	22,131
Work in-process		130,211		44,523
Finished goods		162,082		167,584
Total inventories	$	315,518	$	234,238

Description	Balance at Beginning of Period		Additions (1)		Deductions (2)			Balance at End of Period
	(In thousands)
Year ended January 30, 2005
Allowance for sales returns	$	9,421	$	22,463	$	(20,197	)	$	11,687
Year ended January 25, 2004
Allowance for sales returns	$	13,228	$	23,796	$	(27,603	)	$	9,421
Year ended January 26, 2003
Allowance for sales returns	$	15,586	$	20,147	$	(22,505	)	$	13,228

	Options Available forGrant			OptionsOutstanding			Weighted Average Price Per Share
Balances, January 27, 2002		9,416,255			51,879,729		$	19.14
Authorized		13,957,063			--			--
Granted		(8,522,650	)		8,522,650			28.09
Shares of common stock issued in exchange for stock Options		(3,815,069	)		--			--
Exercised		--			(3,816,695	)		4.62
Cancelled - unvested (1)		18,067,604			(18,067,604	)		36.53
Cancelled - vested (2)		2,882,376			(2,882,376	)		32.51
Balances, January 26, 2003		31,985,579			35,635,704		$	12.93
Authorized		8,796,156			--			--
Granted		(12,680,144	)		12,675,144			14.77
Exercised		--			(4,688,703	)		5.17
Cancelled		855,440			(855,440	)		19.26
Balances, January 25, 2004		28,957,031			42,766,705		$	14.20
Authorized		--			--			--
Granted		(8,514,926	)		8,514,926			23.48
Exercised		--			(3,051,875	)		8.29
Cancelled		2,069,599			(2,069,599	)		18.82
Balances, January 30, 2005		22,511,704			46,160,157		$	16.10

	Options Outstanding						Options Exercisable
Range of Exercise Prices	NumberOutstanding		Weighted Average Remaining Contractual Life		Weighted Average ExercisePrice		NumberExercisable		Weighted Average ExercisePrice
$0.09 - $0.09		2,000		1.9	$	0.09		2,000	$	0.09
0.33 - 0.33		123,300		2.6	$	0.33		123,300	$	0.33
0.66 - 0.79		567,960		2.9	$	0.75		567,960	$	0.75
1.04 - 1.38		174,668		3.0	$	1.29		174,668	$	1.29
1.58 - 2.25		4,465,078		3.3	$	1.78		4,465,078	$	1.78
4 .09 - 5.88		3,609,167		4.5	$	4.80		3,585,022	$	4.80
7.65 - 11.07		4,387,246		6.0	$	9.45		3,274,188	$	9.49
11.51 - 17.18		14,133,223		5.0	$	14.49		6,857,542	$	14.81
17.53 - 26.25		13,953,002		5.4	$	22.38		6,210,995	$	19.79
26.38 - 39.54		4,120,013		5.9	$	31.90		3,182,306	$	31.44
42.98 - 53.61		624,000		6.6	$	43.35		617,750	$	43.26
65.47 - 65.47		500		7.0	$	65.47		375	$	65.47
$0.09 - $65.47		46,160,157		5.1	$	16.10		29,061,184	$	14.05

Year ending January:	Operating		Capital
	(In thousands)

2006	$	27,534	$	869
2007		27,425		--
2008		27,422		--
2009		26,615		--
2010		26,327		--
2011 and thereafter		55,794		--
Total	$	191,117	$	869
Less amount representing interest at rates ranging from 5% - 10%				(13	)
Present value of minimum lease payments				856
Less current portion				856
Long term portion			$	0

	GPU		MCP		WMP			All Other			Consolidated
	(In thousands)
Twelve Months Ended January 30, 2005:
Revenue	$	1,360,351	$	424,052	$	45,921		$	179,709		$	2,010,033
Operating income (loss)	$	182,045	$	66,454	$	(37,532	)	$	(97,374	)	$	113,593
Twelve Months Ended January 25, 2004:
Revenue	$	1,259,803	$	442,500	$	9,009		$	111,633		$	1,822,945
Twelve Months EndedJanuary 26, 2003:
Revenue	$	1,303,719	$	498,270	$	--		$	107,458		$	1,909,447

	As of		As of
	January 30,		January 25,
	2005		2004
	(In thousands)
Long-lived assets
United States	$	169,872	$	186,280
Other Americas		--		15
Asia Pacific		5,104		1,653
Europe		3,979		2,081
Total long-lived assets	$	178,955	$	190,029

	Fiscal 2005 Quarters Ended
	Jan. 30, 2005		Oct. 24, 2004		July 25, 2004		April 25, 2004
	(In thousands, except per share data)
Statement of Operations Data:
Revenue	$	566,476	$	515,591	$	456,061	$	471,905
Cost of revenue	$	372,661	$	348,849	$	315,968	$	323,069
Gross profit	$	193,815	$	166,742	$	140,093	$	148,836
Net income	$	48,009	$	25,879	$	5,119	$	21,349
Basic net income per share	$	0.29	$	0.16	$	0.03	$	0.13
Diluted net income per share	$	0.27	$	0.15	$	0.03	$	0.12

	Fiscal 2004 Quarters Ended
	Jan. 25, 2004		Oct. 26, 2003		July 27, 2003		April 27, 2003
	(In thousands, except per share data)
Statement of Operations Data:
Revenue	$	472,119	$	486,069	$	459,774	$	404,983
Cost of revenue	$	333,914	$	351,938	$	329,800	$	278,415
Gross profit	$	138,205	$	134,131	$	129,974	$	126,568
Net income	$	24,166	$	6,356	$	24,150	$	19,747
Basic net income per share	$	0.15	$	0.04	$	0.15	$	0.12
Diluted net income per share	$	0.14	$	0.04	$	0.14	$	0.12

Description	Balance at Beginning of Period		Additions (3)			Deductions			Balance at End of Period
	(In thousands)
Year ended January 30, 2005
Allowance for sales returns and allowances	$	9,421	$	22,463		$	(20,197) (1	)	$	11,687
Allowance for doubtful accounts	$	2,310	$	(844	)	$	--		$	1,466
Year ended January 25, 2004
Allowance for sales returns and allowances	$	13,228	$	23,796		$	(27,603) (1	)	$	9,421
Allowance for doubtful accounts	$	4,240	$	731		$	(2,661) (2	)	$	2,310
Year ended January 26, 2003
Allowance for sales returns and allowances	$	15,586	$	20,147		$	(22,505) (1	)	$	13,228
Allowance for doubtful accounts	$	2,493	$	2,413		$	(666) (2	)	$	4,240