We operate on a 52 or 53-week year, ending on the last Sunday in January. Fiscal year 2011 is a 52-week year, compared to fiscal year 2010, which was a 53-week year. The ~~first~~third quarter of fiscal years 2011 and 2010 are both 13-week quarters.

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

Our condensed 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.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP, 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, cash equivalents and marketable securities, accounts receivable, inventories, income taxes, goodwill, stock-based compensation, warranty liabilities, litigation, investigation and settlement costs and other contingencies. These estimates are based on historical ~~facts~~f acts and ~~vario us~~various other assumptions that we believe are reasonable.

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the product has been delivered, the price is fixed or determinable, and collection is reasonably assured. For 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~~or 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 payment.

Our policy on sales to certain distributors, with rights of return, is to defer recognition of revenue and related cost of revenue until the distributors resell the product.

Our customer programs primarily involve rebates, which are designed to serve as sales incentives to resellers of our products in various target markets. We accrue for 100% of the potential rebates and do not apply a breakage factor. We recognize a liability for these rebates at the later of the date at which we record the related revenue or the date at which we offer the rebate. Rebates typically expire six months from the date of the original sale, unless we reasonably believe that the customer intends to claim the rebate. Unclaimed rebates are reversed to revenue.

Our customer programs also include marketing development funds, or MDFs. We account for MDFs as either a reduction of revenue or an operating expense. 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. Depending on market conditions, 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.

For license arrangements that require significant customization of our intellectual property components, we generally recognize this license revenue over the period that services are performed. For all license and service arrangements, 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. Costs incurred in advance of revenue recognized are recorded as deferred costs on uncompleted contracts. If the amount billed exceeds the amount ofo f 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.

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~~to the lower of cost or estimated market ~~obsolescence~~value. Obsolete or unmarketable inventory ~~equal to the difference between the cost of inventory and the estimated market value~~is completely written off based upon assumptions about future demand, future product purchase commitments, estimated manufacturing yield levels and market conditions. We also write off inventory in excess of forecasted future demand. If actual market conditions are less favorable ~~t han~~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. Inventory reserves once established are not reversed until the related inventory has been sold or ~~scrapped, so~~scrapped. So if actual market conditions are more favorable in the fiscal periods subsequent to that in which we record larger than normal inventory reserves, we may have higher gross margins when products are sold. Sales of such ~~products did not have a significant impact on our~~items improved gross profit margin by approximately 3% for the ~~three months ended May 2, 2010.~~ third quarter of fiscal year 2011 and were largely offset by additional inventory write off attributed to the current quarter.

During the first quarter of fiscal year 2011, we adopted new accounting guidance which amends the evaluation criteria to identify the primary beneficiary of a variable interest entity, or VIE, and requires ongoing reassessment of whether an enterprise is the primary beneficiary of the VIE. The new guidance ~~significantly~~ changes the consolidation rules for VIEs, including the consolidation of common structures, such as joint ventures, equity method investments and collaboration arrangements. The guidance is applicable to all new and existing VIEs. The adoption of this new accounting guidance did not have a material impact on our consolidated financial position, results of operations or financial condition.

During the first quarter of fiscal year 2011, we adopted new accounting guidance which ~~amended the existing disclosure requirements by adding required~~requires additional disclosures about items transferring into and out of levels 1 and 2 in the fair value hierarchy; adding separate disclosures about purchases, sales, issuances, and settlements relative to level 3 measurements; and clarifying, among other things, the existing fair value disclosures about the level of disaggregation. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the requirement to provide level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which is effective for fiscal years beginning after December 15, 2010. The adoption of this new accounting guidance impacts only disclosure ~~requiremen ts~~requirements and did not have an impact on our ~~consolidated~~co nsolidated financial position, results of operations or financial condition.

In September 2009, the Financial Accounting Standards Board, or FASB, issued new accounting guidance related to the revenue recognition of multiple element arrangements. The new guidance states that if vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, companies will be required to develop a best estimate of the selling price to separate deliverables and allocate arrangement consideration using the relative selling price method. In addition, the FASB also issued new accounting guidance related to certain revenue arrangements that include software elements. Previously, companies that sold tangible products with “more than incidental” software were required to apply software revenue recognition guidance. This guidance often delayed revenue recognition for the ~~d elivery~~delivery of the tangible product. Under the new guidance, tangible products that have software components that are “essential to the functionality” of the tangible product will be excluded from the software revenue recognition guidance. The new guidance will include factors to help companies determine what is “essential to the functionality.” Software-enabled products will now be subject to other revenue guidance and will ~~likely~~ follow the guidance for multiple deliverable arrangements issued by the FASB in September ~~2009.~~2009 as described above.

We elected to early adopt this accounting guidance at the beginning of the first quarter of fiscal year 2011 on a prospective ~~basis and we~~basis. We did not have a significant change in ~~the~~ units of accounting, allocation methodology, or timing of revenue recognition. As a result, the adoption of these accounting standards did not have a material impact on our consolidated financial position, results of operations or financial condition.

During the ~~three~~nine months ended ~~May 2,~~October 31, 2010, there ~~has been~~was no recent issuance of accounting pronouncements as compared to those described in the Annual Report on Form 10-K for the fiscal year ended January 31, 2010, that are of significance, or have potential material significance to us.

During the three months ended April 26, 2009, we completed a cash tender offer for certain employee stock options. The tender offer applied to outstanding stock options held by employees with an exercise price equal to or greater than $17.50 per share. None of the non-employee members of our Board of Directors or our officers who file reports under Section 16(a) of the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act, were eligible to participate in the tender offer. All eligible options with exercise prices equal to or greater than $17.50 per share but less than $28.00 per share were eligible to receive a cash payment of $3.00 per option in exchange for the cancellation of the eligible option. All eligible options with exercise prices equal to or greater than $28.00 per share were eligible to receive a cash payment of $2.00 per option in exchange for the cancellation of the eligible option.

A total of 28.5 million options were tendered under the offer for an aggregate cash purchase price of $78.1 million, which was paid in exchange for the cancellation of the eligible options. As a result of the tender offer, we incurred a charge of $140.2 million consisting of $124.1 million related to the remaining unamortized stock based compensation expense associated with the unvested portion of the options tendered in the offer, $11.6 million related to stock-based compensation expense resulting from amounts paid in excess of the fair value of the underlying options, plus $4.5 million related to associated payroll taxes, professional fees and other costs.

We measure stock-based compensation expense at the grant date of the related equity awards, based on the fair value of the awards, and recognize the expense using the straight-line attribution method over the requisite employee service period adjusted for estimated forfeitures. We estimate the fair value of employee stock options on the date of grant using a binomial model and we use the closing trading price of our common stock on the date of grant as the fair value of awards of restricted stock units, or RSUs. We calculate the fair value of our employee stock purchase plan using the Black-Scholes model.

In addition to the stock-based compensation expense related to our cash tender offer to purchase certain employee stock options as described in Note 2 – Stock Option Purchase, our consolidated statements of operations include stock-based compensation expense, net of amounts capitalized as inventory, as follows:

During the three and nine months ended ~~May 2,~~October 31, 2010, ~~and April 26, 2009,~~ we granted approximately ~~2.4~~3.0 million and ~~4.9~~5.7 million stock options, respectively, with an estimated total grant-date fair value of ~~$17.6~~$13.7 million and ~~$27.0~~$33.5 million, respectively, and a per option weighted average grant-date fair value of ~~$7.47~~$4.60 and ~~$5.45,~~$5.90, respectively. During the three and nine months ended ~~May 2,~~October 31, 2010, ~~and April 26, 2009,~~ we granted approximately ~~2.7~~3.9 million and ~~4.6~~6.8 million RSUs, respectively, with an estimated total grant-date fair value of ~~$48.5~~$40.8 million and ~~$46.4~~$91.9 million, respectively, and a per RSU weighted average grant-date fair value of ~~$17.94~~$10.53 and ~~$10.17,~~$13.50, respectively.

During the three and nine months ended October 25, 2009, we granted approximately 2.2 million and 7.6 million stock options, respectively, with an estimated total grant-date fair value of $14.9 million and $43.7 million, respectively, and a per option weighted average grant-date fair value of $6.59 and $5.75, respectively. During the three and nine months ended October 25, 2009, we granted approximately 2.7 million and 7.5 million RSUs, with an estimated total grant-date fair value of $41.9 million and $90.7 million, respectively, and a per RSU weighted average grant-date fair value of $15.76 and $12.16 respectively.

Of the estimated total grant-date fair value, we estimated that the stock-based compensation expense related to the equity awards that are not expected to vest was ~~$12.2~~$9.9 million and ~~$11.8~~$22.9 million, respectively, for the three and nine months ended ~~May 2,~~October 31, 2010. As of October 31, 2010, and ~~April 26, 2009, respectively. As of May 2, 2010 and April 26,~~October 25, 2009, the aggregate amount of unearned stock-based compensation expense related to our equity awards was ~~$159.2~~$164.7 million and ~~$130.1~~$142.9 million, respectively, adjusted for estimated forfeitures. As of ~~May 2,~~October 31, 2010 and ~~April 26,~~October 25, 2009, we expect to recognize the unearned stock-based compensation expense related to stock options over an estimated weighted average amortization period of 1.8 years and ~~2.2~~2.0 years, respectively. As of ~~May 2,~~each of October 31, 2010 and ~~April 26,~~October 25, 2009, we expect to recognize the unearned stock-based compensation ~~expen se~~expense related to RSUs over an estimated weighted average amortization period of ~~2.4 years and 2.9 years, respectively.~~2.6 years.

We recognized income tax expense (benefit) of ~~$13.1~~$18.7 million and ~~($23.5)~~$3.8 million for the three and nine months ended ~~May 2,~~October 31, 2010, respectively, and ~~April 26,~~$2.6 million and $(22.7) million for the three and nine months ended October 25, 2009, respectively. Income tax expense (benefit) as a percentage of income (loss) before taxes, or our effective tax rate, was ~~8.7%~~18.1% and ~~(10.5%)~~4.4% for the three and nine months ended ~~May 2,~~October 31, 2010, respectively, and ~~April 26,~~2.4% and 10.2% for the three and nine months ended October 25, 2009, respectively.

The expected tax benefit derived from our loss before tax for the first ~~three~~nine months of fiscal year 2010 at the United States federal statutory ~~tax~~ rate of 35% differs from our actual effective tax rate of ~~(10.5%)~~10.2% primarily due ~~primarily~~ to permanent tax differences related to stock-based compensation ~~including with respect to our stock option purchase completed in the first quarter of 2010,~~and losses recognized in tax jurisdictions where no tax benefit has been recognized, partially offset by the U.S. tax benefit of the federal research tax credit. Our actual effective tax rate was also impacted by discrete events in the first nine months of fiscal year 2010, primarily related to our stock option purchase completed in March 2009 and the favorable impact from the expiration of statutes of limitations in certain non-U.S. jurisdictions.

For the ~~three~~nine months ended ~~May 2,~~October 31, 2010, there have been no material changes to our tax years that remain subject to examination by major tax jurisdictions. Additionally, there have been no material changes to our unrecognized tax benefits and any related interest or penalties from our fiscal year ended January 31, 2010, other than the recognition of tax benefits related to the expiration of statutes of limitations in certain non-U.S. jurisdictions in the ~~three~~nine months ended ~~May 2,~~October 31, 2010.

While we believe that we have adequately provided for all uncertain tax positions, amounts asserted by tax authorities could be greater or less than our accrued position. Accordingly, our provisions on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved with the respective tax authorities. As of ~~May 2,~~October 31, 2010, we do not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next twelve months.

All of our cash equivalents and marketable securities are classified as “available-for-sale” securities. 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.

We performed an impairment review of our investment portfolio as of ~~May 2,~~October 31, 2010. Based on our quarterly impairment review and having considered the guidance in the relevant accounting literature, we did not record any other than temporary impairment charges during the first ~~three~~nine months of fiscal year 2011. We concluded that our investments were appropriately valued and that no additional other than temporary impairment charges were necessary on our portfolio of available for sale investments as of ~~May 2,~~October 31, 2010. The following is a summary of cash equivalents and marketable securities at ~~May 2,~~October 31, 2010 and January 31, 2010:

Net realized gains ~~were not significant~~ for the three and nine months ended ~~May 2,~~October 31, 2010, ~~and April 26, 2009. As of May 2, 2010, we had a net unrealized gain of $11.1 million, which was comprised of gross unrealized gains of $11.4 million, offset by~~were $0.3 million ~~of gross unrealized losses. As of January 31, 2010, we had a net unrealized gain of $12.6~~and $1.3 million, ~~which was comprised of gross unrealized~~respectively. Net realized gains ~~of $12.7~~for the three and nine months ended October 25, 2009, were $0.5 million ~~offset by $0.1~~and $1.5 million, ~~of gross unrealized losses.~~respectively.

As of ~~May 2,~~October 31, 2010, we held a money market investment in the Reserve International Liquidity Fund, Ltd., or the International Reserve Fund, which was valued at $13.0 million, ~~net of~~after a $5.6 million of other than temporary impairment ~~charges~~charge that we recorded during fiscal year 2009. The International Reserve Fund was reclassified out of cash and cash equivalents in our Condensed Consolidated Balance Sheet due to the halting of redemption requests in September 2008 by the International Reserve Fund. The $13.0 million value of our holdings in the International Reserve Fund as of ~~May 2,~~October 31, 2010 reflects an initial investment of $130.0 million, reduced by $111.4 million that we received from the International Reserve Fund during fiscal year 2010 and the $5.6 million other than temporary impairment charge we recorded against the value of this ~~inve stment~~investment during fiscal year 2009 as a result of credit loss. The $111.4 million we received was our portion of a payout of approximately 85.6% of the total assets of the International Reserve Fund. All of the underlying securities held by the International Reserve Fund had matured by October 2009. We expect to ultimately receive the proceeds from our remaining investment in the International Reserve Fund, excluding some or all of the $5.6 million impairment charges. However, redemptions from the International Reserve Fund are currently subject to pending litigation, which could cause further delay in receipt of our funds.

We measure our cash equivalents and marketable securities at fair value. The fair values of our financial assets and liabilities are determined using quoted market prices of identical assets or quoted market prices of similar assets from active markets. Our Level 1 assets consist of our money market fund deposits. We classify securities within Level 1 assets when the fair value is obtained from real time quotes for transactions in active exchange markets involving identical assets. Our available-for- sale securities are classified as having Level 2 inputs. Our Level 2 assets are valued utilizing a market approach where the market prices of similar assets are provided by a variety of independent industry standard data providers to our investment custodian. There were no ~~signif icant~~signifi cant transfers between Levels 1 and 2 assets for the ~~three~~nine months ended ~~May 2,~~October 31, 2010. Level 3 assets are based on unobservable inputs to the valuation methodology and include our own data about assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances.

Financial assets and liabilities measured at fair value are summarized below:

For our money market funds that were held by the International Reserve Fund at ~~May 2,~~October 31, 2010, we assessed the fair value of the money market funds by considering the underlying securities held by the International Reserve Fund. The International Reserve Fund has halted redemption requests due to pending litigation. All of the underlying securities held by the International Reserve Fund had matured by October 2009. We valued the underlying securities held by the International Reserve Fund at their maturity value using an income approach. Certain of the debt securities held by the International Reserve Fund were issued by companies that had filed for bankruptcy during fiscal year 2009 and, as such, our valuation of those securities was zero. The net result was that, during the third quarter of fiscal year 2009, wew e estimated the fair value of the International Reserve Fund’s investments to be 95.7% of their last-known value and we recorded an other than temporary impairment charge of $5.6 million as a result of credit loss. The $13.0 million value of our holdings in the International Reserve Fund as of ~~May 2,~~October 31, 2010 reflects an initial investment of $130.0 million, reduced by $111.4 million that we received from the International Reserve Fund during fiscal year 2010 and the $5.6 million other than temporary impairment charge we recorded against the value of this investment during fiscal year 2009 as a result of credit loss. Due to the inherent subjectivity and the significant judgment involved in the valuation of our holdings of the International Reserve Fund, we have classified these securities under the Level 3 fair value hierarchy.

Reconciliation of financial assets measured at fair value on a recurring basis using significant unobservable inputs, or Level 3 inputs (in thousands):

Total financial assets at fair value classified within Level 3 were 0.3% of total assets on our Condensed Consolidated Balance Sheet as of ~~May 2,~~October 31, 2010.

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. On December 15, 2000, NVIDIA Corporation and one of our indirect subsidiaries entered into an Asset Purchase Agreement, or the APA, which closed on April 18, 2001, to purchase certain graphics chip assets from 3dfx.

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, the Trustee appointed by the Bankruptcy Court to represent 3dfx’s bankruptcy estate served his complaint on NVIDIA. The Trustee’s complaint asserted claims for, among other things, successor liability and fraudulent transfer and sought additional payments from us. In early November 2005, NVIDIA and the Official Committee of Unsecured Creditors, or the Creditors’ Committee, agreed to a Plan of Liquidation of 3dfx, which included a conditional settlement of the Trustee’s claims against us. This conditional settlement was subject to a confirmation process through a vote of creditors and the review and approval of the Bankruptcy ~~Court.~~Co urt. The conditional settlement called for a payment by NVIDIA of approximately $30.6 million to the 3dfx estate. Under the settlement, $5.6 million related to various administrative expenses and Trustee fees, and $25.0 million related to the satisfaction of debts and liabilities owed to the general unsecured creditors of 3dfx. Accordingly, 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 Trustee advised that he intended to object to the settlement.

The conditional settlement reached in November 2005 never progressed through the confirmation process and the Trustee’s case still remains pending appeal. As such, we have not reversed the accrual of $30.6 million - $5.6 million as a charge to settlement costs and $25.0 million as additional purchase price for 3dfx – that we recorded during the three months ended October 30, 2005, pending resolution of the appeal of the Trustee’s case.

The 3dfx asset purchase price of $95.0 million and $4.2 million of direct transaction costs were allocated based on fair values presented below. The final allocation of the purchase price of the 3dfx assets is contingent upon the outcome of all of the 3dfx litigation. Please refer to Note 12 of these Notes to the Condensed Consolidated Financial Statements for further information regarding this litigation.

The components of our amortizable intangible assets are as follows:

Certain balance sheet components are as follows:

At ~~May 2,~~October 31, 2010, we had outstanding inventory purchase obligations totaling approximately ~~$648.1~~$448.7 million.

During the second quarter of ~~May 2, 2010, our Condensed Consolidated Balance Sheet included~~fiscal year 2011, we recorded an ~~accrued liability~~additional charge to cover the estimated remaining customer warranty, repair, return, replacement and other costs arising from a weak die/packaging material set in certain versions of our previous generation media and communications processor, or MCP, and graphics processing unit, or GPU, products used in notebook configurations. ~~During~~The net charge amounted to $193.9 million, of which $181.2 million was charged against cost of revenue. The extra remediation costs are primarily due to additional platforms from late failing systems that we had not previously considered to be at risk. Included in the charge are the estimated costs of implementing a settlement reached during the second quarter of fiscal ~~years 2010~~year 2011 with the plaintiffs of a putative consumer class action lawsuit related to this same matter and ~~2009,~~another related estimated consumer class action settlement. As a result of this settlement, the other estimated settlement, and offsetting insurance reimbursements, we recorded a ~~warranty~~net charge ~~against cost~~ of ~~revenue~~$12.7 million to sales, general and administrative expense during the second quarter of ~~$360.4~~fiscal year 2011. Together with the $282.0 million net charge we had previously recorded for related estimated costs, ~~offset by reimbursements from insurance carriers~~this brings the total cumulative net charge to $475.9 million, of ~~$75.3 million. The weak die/packaging material combination is not used in any~~which $466.4 million has been charged against cost of ~~our products that are currently in production.~~revenue.

~~We record a reduction to revenue for estimated product returns at the time revenue is recognized primarily based on historical return rates.~~ Cost of revenue includes the estimated cost of product warranties that are calculated at the point of revenue recognition. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. Additionally, we accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated. The estimated product ~~returns and estimated product~~ warranty liabilities for the three and nine months ended ~~May 2,~~October 31, 2010 and ~~April 26,~~October 25, 2009 are as follows:

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. As such, we have not recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications. U.S. GAAP 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, disclosures about the guarantees that an entity has issued, ~~including~~in cluding a tabular reconciliation of the changes of the entity’s product warranty liabilities are also required.

Our CODM does not review any information regarding total assets on an operating 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 NVIDIA as a whole.

Revenue from significant customers, those representing 10% or more of total revenue, aggregated approximately ~~28%~~12% of our total revenue from ~~two customers for the three months ended May 2, 2010~~one customer and ~~approximately 22%~~13% of our total revenue from ~~two customers~~one customer for the three and nine months ended ~~April 26, 2009.~~October 31, 2010, respectively. Revenue from significant customers aggregated approximately 14% and 12% of our total revenue from one customer for the three and nine months ended October 25, 2009, respectively.

Accounts receivable from significant customers, those representing 10% or more of total accounts receivable, aggregated approximately ~~27% from~~34% of our accounts receivable balance from ~~two~~three customers at ~~May 2,~~October 31, 2010 and approximately 20% of our accounts receivable balance from two customers at January 31, 2010.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Item 6. Selected Financial Data” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2010 and Part II, “Item 1A. Risk Factors”, of our Condensed Consolidated Financial Statements and related Notes thereto, as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form 10-Q, before deciding to purchase, hold or sell shares of our common stock.

NVIDIA Corporation ~~helped awaken the world to the power of computer graphics when it~~ invented the graphics processing unit, or GPU, in 1999. Since then, it has strived to set new standards in visual computing with interactive graphics available on devices ranging from tablets and portable media players to notebooks and workstations. Expertise in programmable GPUs has led to breakthroughs in parallel processing which make supercomputing inexpensive and widely accessible. We serve the entertainment and consumer market with our GeForce and ION graphics products, the professional design and visualization market with our Quadro graphics products, the high-performance computing market with our Tesla computing solutions products, and the mobile computing market with our Tegra system-on-a-chip products. We have three major operating segments: the GPU business, the ~~Professional~~Profe ssional Solutions Business, or PSB, and the Consumer Products Business, or CPB.

During the second quarter of fiscal year 2011, we launched our GeForce GTX 460. The GTX 460 uses our second-generation Fermi architecture and delivers a DirectX 11 gaming experience at a balance of price, performance and power.

During the first quarter of fiscal year 2011, we announced and shipped our GeForce GTX 480 and 470 GPUs, the first GPUs based on our Fermi architecture. The GeForce GTX 480 and GTX 470 GPUs are designed to excel at tessellation, the defining feature of DirectX 11. The GeForce GTX 480/470 GPUs also provide a higher computational capability, which ~~will~~is designed to allow game developers to increase the level of physics realism via our PhysX API. We also began shipments of the GeForce 320M chipset to Apple for incorporation into their latest 13-inch MacBook notebooks. The 320M delivers up to an 80% performance increase over the previous GeForce 9400M GPU. Our stereo 3D technology continued to gain acceptance in the quarter as we sold a record number of our NVIDIA 3D Vision ~~kits~~.ki ts.

During the second quarter of fiscal year 2011, demand for our workstation products ~~continues~~continued to recover, fueled by demand from enterprise customers and new growth markets like video editing. During SIGRRAPH 2010, we introduced new Quadro GPU products based on our Fermi architecture and 3D Vision Pro, a new 3D stereoscopic solution that empowers engineers, designers, architects and computational chemists who work with complex 3D designs to experience a rich, reliable 3D viewing for large scale visualization environments.

The new Quadro GPUs deliver performance that is up to five times faster for 3D applications and up to eight times faster for computational simulation than our previous Quadro generation products. During the second quarter of fiscal year 2011, our Tesla high performance computing products achieved another record revenue quarter, and continues to make progress in our targeted vertical markets including supercomputing, energy and finance.

During the first quarter of fiscal year 2011, we announced that a range of NVIDIA Quadro professional graphics solutions are certified by Adobe for Adobe Creative Suite 5 software, which provides real-time video editing and effects processing of Adobe Premiere Pro CS5. Tesla achieved record revenue during the first quarter of fiscal year 2011 following the launch of Tesla products based on our new Fermi architecture. ~~We are seeing adoption of Tesla systems in industries such as supercomputing, energy and finance.~~

We intend to fully support our customers in their repair and replacement of these impacted products that fail, and their other efforts to mitigate the consequences of these failures. We continue to seek access to our insurance coverage regarding reimbursement to us for some or all of the costs we have incurred and may incur in the future relating to the weak material set. However, there can be no assurance that we will recover any additional reimbursement. We continue to not see any abnormal failure rates in any systems using NVIDIA products other than certain notebook configurations. However, we are continuing to test and otherwise investigate other products. There can be no assurance that we will not discover defects in other products.

In November 2008, Rambus filed a complaint alleging patent infringement against NVIDIA and other respondents with the U.S. International Trade Commission, or ITC. The complaint seeks an exclusion order barring the importation of products that allegedly infringe the Rambus patents.

The ITC has instituted an investigation and a hearing was held in October 2009. The Administrative Law Judge issued an Initial Determination in January 2010, which found the asserted claims of two patents in one patent family infringed but invalid, and the asserted claims of three patents in a separate patent family, valid, infringed and enforceable. The ITC issued a Final Decision on July 26, 2010. In its Final Decision, the ITC found that NVIDIA infringed three related patents and issued a limited exclusion order prohibiting import of certain NVIDIA products. NVIDIA is appealing the ruling.

Our Board of Directors, or our Board, has authorized us, subject to certain specifications, to repurchase shares of our common stock up to an aggregate maximum amount of $2.7 billion through May 2013. During the three and nine months ended October 31, 2010, we did not enter into any structured share repurchase transactions or otherwise purchase any shares of our common stock. Through ~~May 2,~~October 31, 2010, we have repurchased an aggregate of 90.9 million shares under our stock repurchase program for a total cost of $1.46 billion. As of ~~May 2,~~October 31, 2010, we are authorized, subject to certain specifications, to repurchase shares of our common stock up to ~~an additional amount of~~ $1.24 billion through May 2013.

Our Chief Executive Officer, who is considered to be our chief operating decision maker, or CODM, reviews financial information presented on a operating segment basis for purposes of making operating decisions and assessing financial performance.

During the first quarter of fiscal year 2011, we began reporting internally the results of our former MCP segment along with the results of our GPU segment to reflect the way we manage the GPU business. Comparative periods presented reflect this change. We report financial information for three operating segments to our CODM: the GPU business, which is comprised primarily of our GeForce and ION products that support desktop, notebook and netbook ~~personal computers, or~~ PCs and also includes memory products; the PSB, which is comprised of our NVIDIA Quadro professional workstation products and other professional graphics products, including our NVIDIA Tesla high-performance computing products; and our CPB, which is comprised of our Tegra mobile products that support tablets and smartbooks, ~~smartpho nes, personal media players, or~~smartphones, PMPs, ~~internet~~interne t television, automotive navigation, and other similar devices. CPB also includes license, royalty, other revenue and associated costs related to video game consoles and other digital consumer electronics devices.

The “All Other” category includes non-recurring charges that we do not allocate to our other operating segments as these expenses are not included in the segment operating performance measures evaluated by our CODM. There were no non-recurring charges for the first ~~quarter~~nine months of fiscal year 2011. Non-recurring charges related to our cash tender offer to purchase certain employee stock options were $140.2 million for the first quarter of fiscal year 2010. Please refer to Note 2 of the Notes to the Condensed Consolidated Financial Statements for further discussion regarding the cash tender offer and Note 15 of the Notes to the Condensed Consolidated Financial Statements for further disclosure regarding segment information.

The following table sets forth, for the periods indicated, certain items in our condensed consolidated statements of operations expressed as a percentage of revenue.

Revenue was ~~$1.00 billion~~$843.9 million for ~~the first~~our third quarter of fiscal year 2011, compared to ~~$664.2~~$903.2 million for ~~the first~~our third quarter of fiscal year 2010, which represents a decrease of approximately 6.6%. Revenue was $2.66 billion for the first nine months of fiscal year 2011 and $2.34 billion for the first nine months of fiscal year 2010, which represented an increase of ~~51%~~13.4%. We expect ~~a seasonal decrease in~~ revenue ~~of 3%~~ to 5%increase slightly during the ~~second~~fourth quarter of fiscal year 2011 as compared to the ~~first~~third quarter of fiscal year 2011. A discussion of our revenue results for each of our operating segments is as follows:

GPU Business revenue increased slightly by 1.7% to $1.91 billion for the ~~graphics~~first nine months of fiscal year 2011 compared to $1.88 billion for the first the first nine months of fiscal year 2010. The increase was primarily the result of increased sales of our notebook GPU products offset by decreased sales of our desktop GPU and MCP products. The growth in the sales of notebook GPU products was driven by a continuing shift in the market ~~grew~~demand towards notebook PCs from desktop PCs. Offsetting this growth was a decrease in sales of our MCP products due to a drop in unit shipments driven by ~~67% from a year ago.~~weakness in our end customer markets.

Revenue from sales to customers outside of the United States and other Americas accounted for 81% and 85% of total revenue for the ~~first~~third quarter of fiscal ~~year~~years 2011 and ~~82% of total revenue~~2010, respectively, and 83% and 84% for the first ~~quarter~~nine months of fiscal ~~year 2010.~~years 2011 and 2010 respectively. Revenue by geographic region is allocated to individual countries based on the location to which the products are initially billed even if the revenue is attributable to end customers in a different location.

Revenue from significant customers, those representing 10% or more of total revenue aggregated approximately ~~28%~~12% of our total revenue from ~~two customers~~one customer for the ~~first~~third quarter ~~of fiscal year 2011~~ and ~~22%~~13% of our total revenue from ~~two customers~~one customer for the first ~~quarter~~nine months of fiscal year ~~2010.~~2011. Revenue from significant customers aggregated approximately 14% and 12% of our total revenue from one customer for the third quarter and first nine months of fiscal year 2010, respectively.

Gross profit consists of total revenue, net of allowances, less cost of revenue. Cost of revenue consists 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 and warranty provisions and shipping costs. Cost of revenue also includes development costs for license, service arrangements and stock-based compensation related to personnel associated with manufacturing.

Gross margin is the percentage of gross profit to revenue. Our gross margin can vary in any period depending on the mix of types of products sold. Our gross margin is significantly impacted by the mix of products we sell. Product mix is often difficult to estimate with accuracy. Therefore, if we experience product transition challenges, if we achieve significant revenue growth in our lower margin product lines, or if we are unable to earn as much revenue as we expect from higher margin product lines, our gross margin may be negatively impacted.

A discussion of our gross margin results for each of our operating segments is as follows:

Research and development expenses were ~~$218.1~~$204.5 million and ~~$301.8~~$197.9 million during the third quarter of fiscal year 2011 and 2010, respectively, an increase of $6.6 million, or 3.3%. Compensation and benefits increased by $6.7 million and stock based compensation increased by $1.3 million, primarily related to growth in headcount. Development spending also increased $1.4 million. These increases were offset by a decrease of $2.8 million in depreciation and amortization associated with fully depreciated assets.

Research and development expenses were $633.3 million and $692.6 million in the first ~~quarters~~nine months of fiscal years 2011 and 2010, respectively, a decrease of ~~$83.7~~$59.3 million, or ~~28%~~8.6%. During the first ~~quarter~~nine months of fiscal year 2010, research and development expenses included stock-based compensation of $90.5 million related to the purchase of certain outstanding options that were tendered in March 2009. Compensation and benefits increased by $5.7 million primarily related to growth in headcount in departments related to research and development functions. Development expenses increased by $7.5 million primarily due to increased expenses related to engineering consumption, prototype materials, testing devices, and internal board requests. These increases were offset by a decrease of $2.3 million in depreciati on and amortization due to fully depreciated assets and a decrease of $6.7 million inIn addition, ongoing stock-based compensation expense decreased in the first nine months of fiscal year 2011 by $4.1 million resulting from the cancellation of stock options pursuant to the tender ~~offer.~~offer in March 2009 and depreciation and amortization decreased by $7.6 million as a result of fully depreciated assets. These decreases were offset by increases in compensation and benefits by $20.0 million primarily related to growth in headcount and increases in development spending by $12.7 million.

Sales, general and administrative expenses were ~~$90.9~~$83.8 million and ~~$118.9~~$86.0 million during the ~~first~~third quarters of fiscal years 2011 and 2010, respectively, a decrease of ~~$28.0~~$2.2 million, or ~~24%~~2.6%. ~~During~~This decrease was primarily attributable to $4.9 million decrease in outside professional fees incurred in the prior year due to certain litigation and other matters and $3.8 million decrease in other expenses primarily due to renegotiated rents for our main campus and settlement proceeds received in third quarter of fiscal year 2011. This decrease was offset by a $6.4 million increase in compensation and benefits by due to headcount growth in departments related to sales, general, and administrative functions.

Sales, general and administrative expenses were $273.5 million and $278.8 million for the first ~~quarter~~nine months of fiscal years 2011 and 2010, respectively, a decrease of $5.3 million, or 1.9%. The decrease was primarily attributable to $5.4 million decrease in outside professional fees and $3.0 million decrease in depreciation and amortization due to fully depreciated assets. Additionally, the first nine months of fiscal year 2010, sales, general and administrative expenses included stock-based compensation of $38.3 million related to the purchase of certain outstanding options that were tendered in March 2009. ~~Compensation~~These decreases were offset by increases in compensation and benefits ~~increased by $9.1~~of $24.0 million primarily due to headcount growth in departments related to sales, general, and administrative functions, and ~~incentive bonus expenses.~~an increase in marketing expense of $4.9 million. Additionally, asduring the second quarter of fiscal year 2011, we recorded a charge for estimated costs of implementing a settlement with the plaintiffs of a putative consumer class action lawsuit and another related estimated consumer class action settlement. As a result of the settlement in principle, another related estimated settlement, and offsetting insurance reimbursements, we recorded a ~~partial resumption~~net charge of ~~spending in discretionary areas, there were increases in expenses related~~$12.7 million to ~~computer software~~sales, general and equipment of $2.1 million, marketing of $1.7 million, and trav el and entertainment of $1.4 million. These increases were offset by a decrease of $1.5 million in depreciation and amortization due to fully depreciated assets and a decrease of $1.9 million in ongoing stock-based compensation expense resulting from the cancellation of stock options pursuant to the tender offer.administrative expenses.

We expect operating expenses to be ~~flat~~approximately $300 million in the ~~second quarter of fiscal year 2011 compared to the first~~fourth quarter of fiscal year 2011.

Interest income ~~net of interest expense~~ consists of interest earned on cash, cash equivalents and marketable securities. Interest income ~~decreased to $4.8~~was $4.2 million and $5.4 million in the ~~first~~third quarter of fiscal ~~year~~years 2011 ~~from $5.3~~and 2010, respectively, a decrease of $1.2 million. Interest income was $14.6 million inand $17.3 million for the first ~~quarter~~nine months of fiscal ~~year~~years 2011 and 2010, respectively, a decrease of $2.7 million. These decreases were primarily due to ~~the result of~~ lower interest rates ~~earned on our investments~~ in the third quarter and first ~~quarter~~nine months of fiscal year 2011 when compared to the third quarter and first ~~quarter~~nine months of fiscal year 2010.

Other income and expense primarily consists of realized gains and losses on the sale of marketable securities and foreign currency translation. Other (expense), net of other income was ($~~1.4)~~4.4) million in the ~~first~~third quarter of fiscal year 2011 ~~and $0.8~~compared to ($3.1) million of other (expense), net of other income in the ~~first~~third quarter of fiscal year 2010. The ~~fluctuation~~increase of ~~$2.3~~$1.3 million was primarily driven by ~~realized gains from investments~~an increase in foreign currency losses in the ~~first~~third quarter of fiscal year ~~2010.~~

We recognized income tax expense (benefit) of ~~$13.1~~$18.7 million and ~~($23.5)~~$3.8 million for the ~~first quarter of fiscal years 2011~~three and nine months ended October 31, 2010, respectively, and $2.6 million and $(22.7) million for the three and nine months ended October 25, 2009, respectively. Income tax expense (benefit) as a percentage of income (loss) before taxes, or our effective tax rate, was ~~8.7%~~18.1% and ~~(10.5%)~~4.4% for the ~~first quarter of fiscal years 2011~~three and nine months ended October 31, 2010, respectively, and 2.4% and 10.2% for the three and nine months ended October 25, 2009, respectively.

The expected tax benefit derived from our loss before tax for the first ~~quarter~~nine months of fiscal year 2010 at the United States federal statutory tax rate of 35% differs from our actual effective tax rate of ~~(10.5%)~~10.2% due primarily to permanent tax differences related to stock-based compensation ~~including with respect to our stock option purchase completed in the first quarter of fiscal year 2010,~~ and losses recognized in tax jurisdictions where no tax benefit has been recognized, partially offset by the U.S. tax benefit of the ~~United States~~ federal research tax credit. Our actual effective tax rate was also impacted by discrete events in the first nine months of fiscal year 2010, primarily related to our stock option purchase completed in March 2009 and the favorable impact from the expiration of statutes of limitations in certain non-U.S. jurisdictions.

As of ~~May 2,~~October 31, 2010, we had ~~$1.76~~$1.99 billion in cash, cash equivalents and marketable securities, an increase of ~~$36.7~~$259.0 million from $1.73 billion at the end of fiscal year 2010. Our portfolio of cash equivalents and marketable securities is managed by several financial institutions. Our investment policy requires the purchase of top-tier investment grade securities, the diversification of asset type and includes certain limits on our portfolio duration.

Operating activities ~~used cash of $5.4 million and~~ provided cash of ~~$142.1~~$241.1 million and $418.6 million during the first ~~quarter~~nine months of fiscal years 2011 and 2010, respectively. The decrease in cash provided by operating activities in the first ~~quarter~~nine months of fiscal year 2011 was primarily due to ~~additional~~increases in working capital as a result of ~~significant increases~~an increase in ~~accounts receivables driven by less sales linearity and increases in~~ inventories ~~due to builds~~ for the GPU ~~business. This was offset by cash earnings~~business and decreases in accounts payable due to the timing of payment of vendor invoices. A decrease in non-cash items for the first nine months of fiscal year 2011 when compared to the first nine months of fiscal year 2010 comprised primarily of ~~an increase in net income after adding back non-cash~~ depreciation and stock based ~~compensation.~~compensation expense, contributed to the decrease in operating cash flows as well.

Investing activities ~~have~~ consisted primarily of purchases and sales of marketable securities ~~acquisitions of businesses~~ and purchases of property and equipment, which include ~~the purchase of property,~~ leasehold improvements for our facilities and intangible assets. Investing activities used cash of ~~$57.3~~$340.4 million and ~~$8.9~~$235.6 million during the first ~~quarters~~nine months of fiscal years 2011 and 2010, respectively. The increase in cash used in investing activities in the first quarter of fiscal year 2011 was driven by increases in purchase of marketable securities and decreases in proceeds received from sales and maturities of securities.

We expect to spend approximately ~~$100 million to $150~~$50 million for capital expenditures during the remainder of fiscal year 2011, primarily for ~~leasehold improvements,~~ software ~~licenses, emulation equipment, computers and engineering workstations.~~licenses. In addition, we may continue to use cash in connection with the acquisition of new businesses or assets.

Financing activities provided cash of ~~$62.8~~$103.3 million and ~~used cash of $38.6~~$13.8 million during the first ~~quarter~~nine months of fiscal years 2011 and 2010, respectively. Net cash provided by financing activities in the first ~~quarter~~nine months of fiscal year 2011 was primarily due to an increase of proceeds from issuance of common stock under our employee stock plans during the first ~~quarter~~nine months of fiscal year 2011. ~~In addition, cash provided by financing activities during~~During the first ~~quarter of fiscal year 2011 was greater as compared to the first quarter~~nine months of fiscal year 2010, ~~due~~$78.1 million was paid to ~~a cash payment made towards~~ purchase ~~of certain outstanding~~stock options ~~that were~~ tendered in March ~~2009.~~2009, offset by cash proceeds of $47.1 million from common stock issued under our employee stock plans.

Our primary source of liquidity is cash generated by our operations. Our investment portfolio consisted of cash and cash equivalents, ~~asset-backed securities,~~ commercial paper, mortgage-backed securities issued by government-sponsored enterprises, equity securities, money market funds and debt securities of corporations, municipalities and the United States government and its agencies. These investments are denominated in United States dollars. As of ~~May 2,~~October 31, 2010, we did not have any investments in auction-rate preferred securities.

All of our cash equivalents and marketable securities are treated as “available-for-sale”. 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 debt or equity investments is judged to be other-than-temporary. 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 any debt securities we hold ~~are~~a re classified as “available-for-sale,” no gains or losses are realized in our statement of operations due to changes in interest rates unless such securities are sold prior to maturity or unless declines in market values 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 ~~May 2,~~October 31, 2010 and January 31, 2010, we had ~~$1.76~~$1.99 billion and $1.73 billion, respectively, in cash, cash equivalents and marketable securities. Our investment policy requires the purchase of top-tier investment grade securities and the diversification of asset types and includes certain limits on our portfolio duration, as specified in our investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument. As of ~~May 2,~~October 31, 2010, we were in compliance with our investment policy. As of ~~May 2,~~October 31, 2010, our investments in government agencies and government sponsored enterprises represented approximately ~~64%~~60% of our total investment portfolio, while the financial sector accounted for approximately ~~23%~~32% of our total investment ~~portfol io.~~portfolio.&# 160; All of our investments are with A/A2 or better rated securities.

We performed an impairment review of our investment portfolio as of ~~May 2,~~October 31, 2010. Based on our quarterly impairment review, we concluded that our investments were appropriately valued and did not record any impairment during three months ended ~~May 2,~~October 31, 2010. However, during fiscal year 2009, we recorded an other than temporary impairment charge of $5.6 million related to our investment in the money market funds held by the Reserve International Liquidity Fund, Ltd., or International Reserve Fund. Please refer to Note 7 of the Notes to the Condensed Consolidated Financial Statements for further details.

Net realized gains, for the three and nine months ended October 31, 2010 were $0.3 million and $1.3 million, respectively. Net realized gains, excluding any impairment charges, for the three and nine months ended October 25, 2009 were ~~$0.3~~$0.5 million and ~~$0.8~~$1.5 million, ~~for the first quarters of fiscal year 2011 and 2010,~~ respectively. As of ~~May 2,~~October 31, 2010, we had a net unrealized gain of ~~$11.1~~$13.0 million, which was comprised of gross unrealized gains of ~~$11.4~~$13.0 million, offset by ~~$0.3 million of~~ gross unrealized ~~losses.~~losses that were insignificant. As of January 31, 2010, we had a net unrealized gain of $12.6 million, which was comprised of gross unrealized gains of $12.7 million, offset by $0.1 million of gross unrealized losses.

As of ~~May 2,~~October 31, 2010, we held a money market investment in the International Reserve Fund, which was valued at $13.0 million, ~~net of~~after a $5.6 million of other than temporary impairment ~~charges~~charge that we recorded during fiscal year 2009. We reclassified this amount out of cash and cash equivalents in our Condensed Consolidated Balance Sheet due to the halting of redemption requests in September 2008 by the International Reserve Fund. The $13.0 million value of our holdings in the International Reserve Fund as of ~~May 2,~~October 31, 2010 reflects an initial investment of $130.0 million, reduced by $111.4 million that we received from the International Reserve Fund during the fiscal year 2010 and the $5.6 million other than temporary impairment charge we recorded against the value of this investment during fiscal year 2009. The $111.4 ~~million~~millio n we received was our portion of a payout of approximately 85.6% of the total assets of the International Reserve Fund. All of the underlying securities held by the International Reserve Fund had matured by the end of fiscal year 2010. We expect to ultimately receive the proceeds from our remaining investment in the International Reserve Fund, excluding some or all of the $5.6 million impairment charges. However, redemptions from the International Reserve Fund are currently subject to pending litigation, which could cause further delay in receipt of our funds.

Our accounts receivable are highly concentrated and make us vulnerable to adverse changes in our customers’ businesses, and to downturns in the industry and the worldwide economy. ~~Two~~Three customers accounted for approximately ~~27%~~34% of our accounts receivable balance at ~~May 2,~~October 31, 2010. While we strive to limit our exposure to uncollectible accounts receivable using a combination of credit insurance and letters of credit, difficulties in collecting accounts receivable could materially and adversely affect our financial condition and results of operations. These difficulties are heightened during periods when economic conditions worsen. 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 ~~est imated~~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. If the financial condition of our customers were to deteriorate, resulting in an impairment in 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, any of which could adversely affect our operating results. In the future, we may have to record additional reserves or write-offs and/or defer revenue on certain sales transactions which could negatively impact our financial results.

· 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;

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

· new product announcements or product introductions by our competitors.

We expect to spend approximately ~~$100.0 million to $150.0~~$50 million for capital expenditures during the remainder of fiscal year 2011, primarily for ~~property development, leasehold improvements,~~ software ~~licenses, emulation equipment, computers and engineering workstations.~~licenses. In addition, we may continue to use cash in connection with the acquisition of new businesses or assets.

On December 15, 2000, NVIDIA Corporation and one of our indirect subsidiaries entered into an Asset Purchase Agreement, or APA, which closed on April 18, 2001, to purchase certain graphics chip assets from 3dfx. Under the terms of the APA, 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 APA 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 one million shares, which due to subsequent stock splits now totals six 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 ~~satisfi ed~~sa tisfied 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.

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 our purchase of certain assets of 3dfx. In early November 2005, NVIDIA and the Official Committee of Unsecured Creditors, or the Creditors’ Committee, agreed to a Plan of Liquidation of 3dfx, which included a conditional settlement of the Trustee’s claims against us. This conditional settlement was subject to a confirmation process through a vote of creditors and the review and approval of the Bankruptcy Court. The conditional settlement called for a payment by NVIDIA of ~~approximately $ 30.6~~approximat ely $30.6 million to the 3dfx estate. Under the settlement, $5.6 million related to various administrative expenses and Trustee fees, and $25.0 million related to the satisfaction of debts and liabilities owed to the general unsecured creditors of 3dfx. Accordingly, 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 Trustee advised that he intended to object to the settlement.

Please refer to Note 12 of the Notes to the Condensed Consolidated Financial Statements for further information regarding this litigation.

Our products are complex and may contain defects or experience failures due to any number of issues in design, fabrication, packaging, materials and/or use within a system. If any of our products or technologies contains a defect, compatibility issue or other error, we may have to invest additional research and development efforts to find and correct the issue. Such efforts could divert our management’s and engineers’ attention from the development of new products and technologies and could increase our operating costs and reduce our gross margin. In addition, an error or defect in new products or releases or related software drivers after commencement of commercial shipments could result in failure to achieve market acceptance or loss of design wins. Also, we may be required to reimburse customers, ~~includ ing~~includi ng for customers’ costs to repair or replace the products in the field, which could cause our revenue to decline. A product recall or a significant number of product returns could be expensive, damage our reputation and could result in the shifting of business to our competitors. Costs associated with correcting defects, errors, bugs or other issues could be significant and could materially harm our financial results.

The previous generation MCP and GPU products that are impacted were included in a number of notebook products that were shipped and sold in significant quantities. Certain notebook configurations of these products are failing in the field at higher than normal rates. ~~While we have not been able to determine with certainty a root cause for these failures, testing~~Testing suggests a weak material set of die/package combination, system thermal management designs, and customer use patterns are contributing ~~factors.~~factors for these failures. We have worked with our customers to develop and have made available for download a software driver to cause the system fan to begin operation at the powering up of the system and reduce the thermal stress on these chips. We have also recommended to our customers that they consider changing the thermal management of the products in ~~the ir~~their notebook system designs. We intend to fully support our ~~customers~~custom ers in their repair and replacement of these impacted products that fail, and their other efforts to mitigate the consequences of these failures. The weak die/packaging material combination is not used in any of our products that are currently in production.

Please see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in our Annual Report on Form 10-K for a description of our contractual obligations.

As of ~~May 2,~~October 31, 2010, we had no material off-balance sheet arrangements as defined in Regulation S-K 303(a)(4)(ii).

Please see Note 1 of the Notes to Condensed Consolidated Financial Statements for a discussion of adoption of new accounting pronouncements.

Please see Note 1 of the Notes to Condensed Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

Based on their evaluation as of ~~May 2,~~October 31, 2010, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) were effective.

There were no changes in our internal controls over financial reporting during our fiscal quarter ended ~~May 2,~~October 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 NVIDIA have been detected.

Please see Part I, Item 1, Note 12 of the Notes to Condensed Consolidated Financial Statements for a discussion of our legal proceedings.

In evaluating NVIDIA and our business, the following factors should be considered in addition to the other information in this Quarterly Report on Form 10-Q. Before you buy our common stock, you should know that making such an investment involves some risks including, but not limited to, the risks described below. Additionally, 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.

Other factors that could depress demand for our products in the future include conditions in the residential real estate and mortgage markets, expectations for inflation, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors affecting consumer and business spending behavior. These and other economic factors have reduced demand for our products in the past and could further harm our business, financial condition and operating results.

The market for our products is characterized by rapid technological change, new product introductions, evolving industry standards and declining average selling prices. We believe that the principal competitive factors in this market are performance, product bundling by competitors with multiple product lines, breadth and frequency of product offerings, access to customers and distribution channels, backward-forward software support, conformity to industry standard Application Programming Interface, or APIs, manufacturing capabilities, price of processors, and total system costs. 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 level s of quality and at competitive prices. We expect competition to increase from both 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. In addition, it is possible that new competitors or alliances among competitors could emerge and acquire significant market share.

A significant source of competition is from companies that provide or intend to provide GPUs and mobile and consumer products. 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 business is directly affected by market conditions in the highly cyclical semiconductor industry. The semiconductor industry has been adversely affected by many factors, including the global downturn, ongoing efforts by our customers to reduce their spending, diminished product demand, increased inventory levels, lower average selling prices, uncertainty regarding long-term growth rates and underlying financial health and increased competition. These factors, could, among other things, limit our ability to maintain or increase our sales or recognize revenue and in turn adversely affect our business, operating results and financial condition. If our actions to reduce our operating expenses to sufficiently offset these factors when they occur are unsuccessful, our operating results will suffer.

Because the lead-time needed to establish a strategic relationship with a new manufacturing partner and achieve initial production could be over a year, we do not have an alternative source of supply for our products. In addition, the time and effort to qualify a new foundry would result in additional expense, diversion of resources, and could result in 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 the third-party manufacturers we use to ensure adequate product supply and competitive pricing to respond to customer demand.

We use the most advanced manufacturing process technology appropriate for our products that is available from our third-party foundries. As a result, we continuously evaluate the benefits of migrating our products to smaller geometry process technologies in order to improve performance and reduce costs. We believe this strategy will help us remain competitive. Our current product families are manufactured using 0.15 micron, 0.14 micron, 0.13 micron, 0.11 micron, 90 nanometer, 65 nanometer, 55 nanometer and 40 nanometer process technologies. Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development, which could negatively impact our operating expenses and gross margin.

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 new products to smaller geometry processes. Moreover, we are dependent on our third-party manufacturers to invest sufficient funds in new manufacturing processes in order to have ample capacity for all of their customers and to develop the processes in a timely manner. Our product cycles may also depend on our third-party manufacturers migrating to smaller geometry processes successfully and in time for us to meet our customer demands. Some of our competitors own their manufacturing facilities and may be able to move to a new state of the ~~ar t~~art manufacturing process more quickly or more successfully than our manufacturing partners. If our suppliers fall behind our competitors in manufacturing processes, the development and customer demand for our products and the use of our products could be negatively impacted. If we are forced to use larger geometric processes in manufacturing a product than our competition, our gross margin may be reduced. 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.

We cannot be certain that our third-party foundries will be able to develop, obtain or successfully implement high quality, leading-edge process technologies needed to manufacturer our products profitably or on a timely basis or that our competitors (including those that own their own manufacturing facilities) will not develop such high quality, leading-edge process technologies earlier. If our third party-foundries experience manufacturing inefficiencies, we may fail to achieve acceptable yields or experience product delivery delays. If our third-party foundries fall behind our competitors (including those that own their own manufacturing facilities), the development and customer demand for our products and the use of our products could be negatively impacted. Additionally, we cannot be certain that our third-party ~~foundri es~~fo undries will manufacturer our products at a price that is competitive to what our competitors pay. If our third-party foundries do not charge us a competitive price, our operating results and gross margin will be negatively impacted.

Manufacturing yields for our products are a function of product design, which is developed largely by us, and process technology, which typically is proprietary to the manufacturer. Low yields may result from either product design or process technology failure. We do not know a yield problem exists until our design is manufactured. When a yield issue is identified, the product is analyzed and tested to determine the cause. 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 foundry capacity, decreases in manufacturing yields could result in an increase in our costs and force us to allocate our available product ~~supply amo ng~~suppl y among our customers. Lower than expected yields could potentially harm customer relationships, our reputation and our financial results.

We manufacture our products based on forecasts of customer demand in order to have shorter shipment lead times and quicker delivery schedules for our customers. As a result, we may build inventories for anticipated periods of growth which do not occur or may build inventory anticipating demand for a product that does not materialize. In forecasting demand, we make multiple assumptions any of which may prove to be incorrect. Situations that may result in excess or obsolete inventory include:

Any inability to sell products to which we have devoted resources could harm our business. In addition, cancellation or deferral of customer purchase orders could result in our holding excess inventory, which could adversely affect our gross margin and restrict our ability to fund operations. Additionally, because we often sell a substantial portion of our products 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 customer cancellations or deferrals. We could be subject to excess or obsolete inventories and be required to take corresponding inventory write-downs and/or a reduction in average selling prices if growth slows or does not materialize, or if we incorrectly forecast product demand, which could negatively impact our financial results.

Conversely, if we underestimate our customers’ demand for our products, our third party manufacturing partners may not have adequate lead-time or capacity to increase production for us meaning that we 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 or timely manner. Inability to fulfill our customers’ orders on a timely basis, or at all, could damage our customer relationships, result in lost revenue, cause a loss in market share, impact our customer relationships or damage our reputation, any of which could adversely impact our business.

We are focused on improving our gross margin. Our gross margin for any period depends on a number of factors, including:

If we do not correctly forecast the impact of any of the relevant factors on our business, there may not be any actions we can take or we may not be able to take any possible actions 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.

Demand for many of our revenue components fluctuates and is difficult to predict, and our operating expenses are relatively fixed and largely independent of revenue. Therefore, it is difficult for us to accurately forecast revenue and profits or losses in any particular period. Our operating expenses, which are comprised of research and development expenses and sales, general and administrative expenses represented 34% and 31% of our total revenue for each of the third quarters of fiscal years 2011 and ~~63%~~2010 respectively, and 34% and 41%, of our total revenue for the first ~~quarters~~nine months of fiscal years 2011 and 2010, respectively. 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 ~~unanticipated~~unantic ipated revenue shortfalls in any quarter. Further, some of our operating expenses, like stock-based ~~compensat ion~~compensation expense, can only be adjusted over a longer period of time and cannot be reduced during a quarter. If we are unable to reduce operating expenses quickly in response to any revenue shortfalls, our financial results will be negatively impacted.

Any one or more of the risks discussed in this Quarterly Report on Form 10-Q 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. Similarly, 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. 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. 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,~~rev enue, gross profit and results of operations.

We derive and expect to continue to derive the majority of our revenue from the sale or license of products for use in the desktop personal computer, or PC, and notebook PC markets, including professional workstations. A reduction in sales of PCs, or a reduction in the growth rate of PC sales, may reduce demand for our products. These 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 their excess inventory has been absorbed, which would have a negative impact on our financial results.

We expect substantial competition from both Intel’s and AMD’s strategy of selling platform solutions, such as the success Intel achieved with its Centrino platform solution. AMD ~~has~~is also ~~announced~~shipping a platform solution. Additionally, Intel and AMD have each announced its intention to integrate a central processing unit, or CPU, and a GPU on the same chip, ~~or same package,~~ as evidenced by AMD’s announcement of its Fusion processor project and Intel’s ~~announcement~~pending introduction of ~~its multichip packaged solution codenamed Arrandale.~~SandyBridge products. If AMD and Intel continue to pursue platform solutions, we may not be able to successfully compete and our business would be negatively impacted.

In order to maintain or improve our financial results, we will need to continue to identify and develop new products as well as identify and enter new markets. As our GPUs and 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, average selling prices and gross margins for our GPUs and other processors could 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, our gross margin and our financial results. We believe the success of our new product introductions will depend on many factors outlined elsewhere in these risk factors as well as the ~~f ollowing:~~following:

To be successful, we must also enter new markets or develop new uses for our future or existing products. We cannot accurately predict if our current or existing products or technologies will be successful in the new opportunities or markets that we identify for them or that we will compete successfully in any new markets we may enter. For example, we have developed products and other technology in order for certain general-purpose computing operations to be performed on a GPU rather than a CPU. This general purpose computing, which is often referred to as GP computing, was a new use for the GPU which had been entirely used for graphics rendering. During fiscal year ~~2008, we introduced our NVIDIA Tesla family of products, which was our entry into the high-performance computing industry, a new market fo r us. During fiscal year~~ 2010, we introduced our next generation CUDA GPU architecture, codenamed “Fermi,” which we expect to be the foundation for ~~computational~~com putational GPUs and enable breakthroughs in both graphics and parallel computing. Some of our competitors, including Intel, are now developing their own solutions for the discrete graphics and computing markets. Our failure to successfully develop, introduce or achieve market acceptance for new GPUs, other products or other technologies or to enter into new markets or identify new uses for existing or future products, could result in rapidly declining average selling prices, reduced demand for our products or loss of market share any of which could cause our revenue, gross margin and overall financial results to suffer.

The 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 OEMs, original design manufacturers or ODMs, add-in board and motherboard manufacturers, is an integral part of 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 or in connection with trade shows. 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~~or der to be included in our ~~customers 217;~~customers’ new system configurations. This requires that we:

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 systems until at least the next design configuration. Therefore, we endeavor to develop close relationships with our OEMs and ODMs, in an attempt to better anticipate and address customer needs in new products so that we will achieve design wins.

Our ability to achieve design wins also depends in part on our ability to identify and be compliant with evolving industry standards. Unanticipated changes in industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers like AMD, Intel and Microsoft Corporation, or Microsoft. If our products are not in compliance with prevailing industry standards, we may not be designed into our customers’ product designs. However, to be compliant with changes to industry standards, we may have to invest significant time and resources to redesign our products which could negatively impact our gross margin or operating results. If we are unable to achieve new design wins for existing or new customers, we may lose market share and our ~~operating~~oper ating results would be negatively impacted.

Our success depends in part upon continued broad adoption of our processors for 3D graphics and multimedia in desktop PC, notebook PC, workstation, high-performance computing, netbooks, smartbooks, tablets, smartphones, 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. Broad market acceptance is difficult to achieve and such market acceptance, if achieved, is difficult to sustain due to intense competition and frequent new ~~tech nology~~technology and product introductions. As such, our financial results would suffer if for any reason our products do not continue to achieve widespread adoption by the market. If we are unable to complete the timely development of new products or if we were unable to successfully and cost-effectively manufacture and deliver products that meet the requirements of the desktop PC, notebook PC, workstation, high-performance computing, netbook, smartbooks, tablets, smartphones, and video game console 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, OEMs, ODMs, add-in-card and motherboard manufacturers, system builders and consumer electronics companies, do not continue to design products that require more advanced or efficient processors and/or the market does not continue to demand new products with increased performance, features, functionality or standards, sales of our products could decline and the markets for our products could shrink. Decreased sales of our products for these markets could negatively impact our revenue and our financial results.

We are 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,~~Although our management systems are designed to maintain compliance, we ~~are subject to the European Union Directive on Restriction of Hazardous Substances Directive,~~cannot assure you that we have been or ~~RoHS Directive, that restricts the use of a number of substances, including lead,~~will be at all times in complete compliance with such laws and other hazardous substances in electrical and electronic equipment in the market in the European Union. We could face significant costs and liabilities in connection with the European Union Directive on Waste Electrical and Electronic Equipment,regulations. If we violate 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.

Environmental laws are complex, change frequently and have tended to become more stringent over time. For example, the European Union and China are two among a growing number of jurisdictions that have enacted in recent years restrictions on the use of lead, among other chemicals, in electronic products. These regulations affect semiconductor packaging. There is a risk that the cost, quality and manufacturing yields of lead-free products may be less favorable compared to lead-based products or that the transition to lead-free products may produce sudden changes in demand, which may result in excess inventory.

There is also a movement to improve the transparency and accountability concerning the supply of minerals coming from the conflict zones of the Democratic Republic of Congo. New U.S. legislation includes disclosure requirements regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries and procedures regarding a manufacturer’s efforts to prevent the sourcing of such “conflict” minerals. The implementation of these requirements could ~~impact our ability to conduct business~~affect the sourcing and availability of minerals used in the ~~countries~~manufacture of semiconductor devices. As a result, there may only be a limited pool of suppliers who provide conflict free metals, and we cannot assure you that we will be able to obtain products in sufficient quantities or ~~states that have adopted these types~~at competitive prices. Also, since our supply chain is complex, we may face reputational challenges with our customers and other stockholders if we are unable to sufficiently verify the origins for all metals used in our products.

Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent registered public accounting firm to audit, 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. However, the manner in which companies and their independent public accounting firms apply these requirements and test companies’ internal controls remains subject to some judgment. To date, we have incurred, and we expect to continue to incur, increased expense and to devote additional management resources to Section 404 compliance. Despite our efforts, if we identify a material weakness in our internal controls, there can be no assurance that we will be ~~a ble~~able to remediate that material weakness in a timely manner, or that we will be able to maintain all of the controls necessary to determine that our internal control over financial reporting is effective. 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.

We prepare our consolidated financial statements in conformity with U.S.GAAP. These principles are constantly subject to review and interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions. Additionally, changes in existing accounting rules or practices, including the possible conversion to unified international accounting standards, could have a significant adverse effect on our results of operations or the manner in which we conduct our business.

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:

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.

Delaware	94-3177549
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

			Page
	PART I : FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	a) Condensed Consolidated Statements of Operations for the three and nine months ended ~~May 2,~~October 31, 2010 and ~~April 26,~~October 25, 2009			3
	b) Condensed Consolidated Balance Sheets as of ~~May 2,~~October 31, 2010 and January 31, 2010			4
	c) Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~May 2,~~October 31, 2010 and ~~April 26,~~October 25, 2009			5
	d) Notes to Condensed Consolidated Financial Statements			6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26		27
Item 33..	Quantitative and Qualitative Disclosures About Market Risk	38		39
Item 4.	Controls and Procedures	39		40
	PART II : OTHER INFORMATION
Item 1.	Legal Proceedings	40		41
Item 1A.	Risk Factors	40		41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
~~Item 5.~~	~~Other Information~~	56	58
Item 6.	Exhibits	57		59
Signature		58		60

						Three Months Ended						Nine Months Ended
	Three Months Ended					October 31, 2010			October 25, 2009			October 31, 2010			October 25, 2009
	May 2, 2010			April 26, 2009
Revenue	$	1,001,813		$	664,231	$	843,912		$	903,206		$	2,656,933		$	2,343,957
Cost of revenue		545,436			474,535		451,850			511,423			1,674,202			1,605,755
Gross profit		456,377			189,696		392,062			391,783			982,731			738,202
Operating expenses:
Operating expenses
Research and development		218,105			301,797		204,527			197,948			633,267			692,600
Sales, general and administrative		90,879			118,864		83,752			85,990			273,495			278,829
Total operating expenses		308,984			420,661		288,279			283,938			906,762			971,429
Income (loss) from operations		147,393			(230,965)		103,783			107,845			75,969			(233,227	)
Interest income		5,571			6,124		4,220			5,444			14,596			17,347
Other income (expense), net		(2,239	)		20		(4,418	)		(3,082	)		(5,302	)		(5,835	)
Income (loss) before income tax expense (benefit)		150,725			(224,821)
Income (loss) before income tax benefit							103,585			110,207			85,263			(221,715	)
Income tax expense (benefit)		13,131			(23,483)		18,723			2,630			3,768			(22,652	)
Net income (loss)	$	137,594		$	(201,338)	$	84,862		$	107,577		$	81,495		$	(199,063	)

Basic income (loss) per share	$	0.24		$	(0.37)
Basic net income (loss) per share						$	0.15		$	0.20		$	0.14		$	(0.36	)
Shares used in basic per share computation		567,183			542,307		577,323			551,283			572,420			546,737

Diluted income (loss) per share	$	0.23		$	(0.37)
Diluted net income (loss) per share						$	0.15		$	0.19		$	0.14		$	(0.36	)
Shares used in diluted per share computation		590,997			542,307		582,648			574,381			584,500			546,737

	May 2, 2010			January 31, 2010			October 31, 2010			January 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	447,262		$	447,221		$	451,174		$	447,221
Marketable securities		1,317,634			1,281,006			1,536,046			1,281,006
Accounts receivable, net		529,663			374,963			399,502			374,963
Inventories		388,139			330,674			377,812			330,674
Prepaid expenses and other		35,530			38,214			34,416			38,214
Deferred income taxes		8,752			8,752			8,752			8,752
Total current assets		2,726,980			2,480,830			2,807,702			2,480,830
Property and equipment, net		548,916			571,858			585,672			571,858
Goodwill		369,844			369,844			369,844			369,844
Intangible assets, net		115,423			120,458			112,642			120,458
Deposits and other assets		41,867			42,928			39,719			42,928
Total assets	$	3,803,030		$	3,585,918		$	3,915,579		$	3,585,918

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	362,740		$	344,527		$	324,770		$	344,527
Accrued liabilities and other		402,553			439,851			491,719			439,851
Total current liabilities		765,293			784,378			816,489			784,378
Other long-term liabilities		152,994			111,950			177,851			111,950
Capital lease obligations, long term		24,098			24,450			23,359			24,450
Commitments and contingencies - see Note 12
Stockholders’ equity:
Preferred stock		—			—			—			—
Common stock		663			653			671			653
Additional paid-in capital		2,288,989			2,219,401			2,386,257			2,219,401
Treasury stock, at cost		(1,473,655	)		(1,463,268	)		(1,479,392	)		(1,463,268	)
Accumulated other comprehensive income		10,872			12,172			12,667			12,172
Retained earnings		2,033,776			1,896,182			1,977,677			1,896,182
Total stockholders' equity		2,860,645			2,665,140			2,897,880			2,665,140
Total liabilities and stockholders' equity	$	3,803,030		$	3,585,918		$	3,915,579		$	3,585,918

Cost of revenue	$	11,412
Research and development		90,456
Sales, general and administrative		38,373
Total	$	140,241

	Three Months Ended							Nine Months Ended
	~~May 2,~~October 31, 2010				~~April 26,~~October 25, 2009
October 31, ~~Stock Options~~ 2010			October 25, 2009
Stock Options		(Using a binomial model)
~~Weighted average expected~~Expected life ~~of stock options~~ (in years)		~~3.8 - 5.7~~4.0-5.5				~~3.8 - 5.8~~3.9-5.7			3.1-6.7		3.6-5.8
Risk free interest rate		~~2.7% - 3.0~~1.9-2.7	%			~~1.8% - 2.2~~2.5-2.8	%		1.9-3.0	%	1.8-2.8	%
Volatility		~~43% - 47~~46-47	%			48-49	%		~~65% - 72~~43-53	%	%48-72	%
Dividend yield		-		-		-			-		-

	Options Outstanding			Weighted Average Exercise Price
Stock Options		(In thousands)			(Per share)
Balances, January 31, 2010		58,348		$	11.30
Granted		2,353		$	18.01
Exercised		(6,292	)	$	8.24
Cancelled		(167	)	$	12.01
Balances, May 2, 2010		54,242		$	11.94

	RSUs		Weighted Average Grant-Date Fair Value		Options Outstanding			Weighted Average Exercise Price
Restricted Stock Units		(In thousands)		(Per share)
Stock Options					(In thousands)			(Per Share)
Balances, January 31, 2010		7,489	$	12.28		58,348		$	11.30
Granted		2,700	$	17.94		5,690		$	13.73
Vested		(1,553)	$	10.17
Exercised						(9,454	)	$	8.05
Cancelled		(116)	$	14.12		(1,388	)	$	12.11
Balances, May 2, 2010		8,520	$	14.44
Balances, October 31, 2010						53,196		$	12.12

Balances, January 31, 2010	44,022
Stock options:
Granted	(~~2,353~~5,690	)
Cancelled	~~167~~1,388
Restricted Stock Units:
Granted	(~~2,700~~6,805	)
Cancelled	~~116~~509
Balances, ~~May 2,~~October 31, 2010	~~39,252~~33,424

	May 2, 2010
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(In thousands)
Debt securities of United States government agencies	$	453,711	$	2,229	$	(55	)	$	455,885
Corporate debt securities		497,606		3,182		(162	)		500,626
Mortgage backed securities issued by United States government-sponsored enterprises		155,743		4,881		-			160,624
Money market funds		31,850		-		-			31,850
Debt securities issued by United States Treasury		348,372		1,068		(16	)		349,424
Total	$	1,487,282	$	11,360	$	(233	)	$	1,498,409
Classified as:
Cash equivalents								$	180,775
Marketable securities									1,317,634
Total								$	1,498,409
	January 31, 2010
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(In thousands)
Debt securities of United States government agencies	$	492,628	$	3,606	$	(29	)	$	496,205
Corporate debt securities		514,200		4,064		(44	)		518,220
Mortgage backed securities issued by United States government-sponsored enterprises		162,693		3,674		(13	)		166,353
Money market funds		94,339		-		-			94,340
Debt securities issued by United States Treasury		316,520		1,318		-			317,838
Asset-backed securities		17		-		-			17
Total	$	1,580,397	$	12,662	$	(86	)	$	1,592,973
Classified as:
Cash equivalents								$	311,967
Marketable securities									1,281,006
Total								$	1,592,973

	October 31, 2010
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(In thousands)
Debt securities of United States government agencies	$	507,621	$	1,727	$	(4	)	$	509,344
Corporate debt securities		662,886		4,312		(26	)		667,172
Mortgage backed securities issued by United States government-sponsored enterprises		140,404		4,551		-			144,955
Money market funds		28,848		-		-			28,848
Debt securities issued by United States Treasury		376,899		2,455		(8	)		379,346
Total	$	1,716,658	$	13,045	$	(38	)	$	1,729,665
Classified as:
Cash equivalents								$	193,619
Marketable securities									1,536,046
Total								$	1,729,665
	January 31, 2010
	Amortized Cost		Unrealized Gain			Unrealized Loss		Estimated Fair Value
	(In thousands)
Debt securities of United States government agencies	$	492,628	$	3,606	$	(29	)	$	496,205
Corporate debt securities		514,200		4,064		(44	)		518,220
Mortgage backed securities issued by United States government-sponsored enterprises		162,692		3,674		(13	)		166,353
Money market funds		94,340		-		-			94,340
Debt securities issued by United States Treasury		316,520		1,318		-			317,838
Asset-backed securities		17		-		-			17
Total	$	1,580,397	$	12,662	$	(86	)	$	1,592,973
Classified as:
Cash equivalents								$	311,967
Marketable securities									1,281,006
Total								$	1,592,973

			Fair Value Measurement at Reporting Date Using
				Quoted Prices in Active Markets for Identical Assets			Significant Other Observable Inputs	High Level of Judgment
	May 2, 2010			(Level 1)			(Level 2)	(Level 3)
		(In thousands)
Other debt securities issued by United States government agencies (1)	$	455,885	$		-	$	455,885	$	-
Corporate debt securities (2)		500,626			-		500,626		-
Debt securities issued by United States Treasury (3)		349,424			-		349,424		-
Money market funds (4)		31,850			18,891		-		12,959
Mortgage-backed securities issued by government-sponsored entities (5)		160,624			-		160,624		-
Total assets	$	1,498,409	$		18,891	$	1,466,559	$	12,959

Balance, beginning of period, January 31, 2010	$	12,959	$	12,959
Transfer into Level 3		-		-
Other than temporary impairment		-		-
Redemption of funds		-		-
Balance, end of period, May 2, 2010	$	12,959
Balance, end of period, October 31, 2010			$	12,959

	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

	May 2, 2010										January 31, 2010
	Gross Carrying Amount			Accumulated Amortization				Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization				Net Carrying Amount
	(In thousands)
Technology licenses		$	135,629		$	(51,806	)		$	83,823	$	135,112		$	(48,337	)		$	$86,775
Acquired intellectual property			75,339			(52,657	)			22,682		75,339			(49,838	)			25,501
Patents			20,848			(11,930	)			8,918		19,347			(11,165	)			8,182
Total intangible assets		$	231,816		$	(116,393	)		$	115,423	$	229,798		$	(109,340	)		$	$120,458

	October 31, 2010								January 31, 2010
	Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Technology licenses		$	136,466	$	(58,795	)	$	77,671	$	135,112	$	(48,337	)	$	$86,775
Acquired intellectual property			76,264		(58,319	)		17,945		75,339		(49,838	)		25,501
Patents			31,098		(14,072	)		17,026		19,347		(11,165	)		8,182
Total intangible assets		$	243,828	$	(131,186	)	$	112,642	$	229,798	$	(109,340	)	$	$120,458

	GPU			PSB		CPB				All Other		Consolidated		GPU			PSB		CPB			All Other			Consolidated
	(In thousands)													(In thousands)
Three Months Ended May 2, 2010:
Three Months Ended October 31, 2010:
Revenue	$	780,853		$	189,730	$	31,230		$	-		$	1,001,813	$	581,863		$	210,115	$	51,934		$	-		$	843,912
Depreciation and amortization expense	$	34,506		$	5,395	$	6,893		$	-		$	46,794	$	31,488		$	7,782	$	7,516		$	-		$	46,786
Operating income (loss)	$	115,344		$	73,865	$	(41,816	)	$	-		$	147,393	$	48,521		$	87,027	$	(31,765	)	$	-		$	103,783
Three Months Ended April 26, 2009:
Three Months Ended October 25, 2009:
Revenue	$	547,384		$	106,148	$	10,699		$	-		$	664,231	$	717,658		$	129,638	$	55,910		$	-		$	903,206
Depreciation and amortization expense	$	36,171		$	7,178	$	7,309		$	-		$	50,658	$	33,972		$	6,648	$	8,150		$	-		$	48,770
Operating income (loss)	$	(68,599	)	$	21,104	$	(43,229	)	$	(140,241	)	$	(230,965)	$	80,833		$	38,600	$	(11,588	)	$	-		$	107,845
Nine Months Ended October 31, 2010:
Revenue														$	1,913,130		$	614,935	$	128,868		$	-		$	2,656,933
Depreciation and amortization expense														$	97,180		$	20,379	$	23,037		$	-		$	140,596
Operating income (loss)														$	(57,846	)	$	246,117	$	(112,302	)	$	-		$	75,969
Nine Months Ended October 25, 2009:
Revenue														$	1,880,659		$	352,413	$	110,885		$	-		$	2,343,957
Depreciation and amortization expense														$	105,692		$	21,037	$	22,021		$	-		$	148,750
Operating income (loss)														$	(115,204	)	$	92,527	$	(70,309	)	$	(140,241	)	$	(233,227	)

	As of May 2, 2010			As of January 31, 2010			As of October 31, 2010			As of January 31, 2010
	(In millions)						(In millions)
Cash and cash equivalents		$	447.3		$	447.2		$	451.2		$	447.2
Marketable securities			1,317.6			1,281.0			1,536.0			1,281.0
Cash, cash equivalents, and marketable securities		$	1,764.9		$	1,728.2		$	1,987.2		$	1,728.2

	Three Months Ended
	May 2,				April 26,
	2010				2009
		(In millions)
Net cash provided by (used in) operating activities		$	(5.4	)		$	142.1
Net cash provided by (used in) investing activities		$	(57.3	)		$	(8.9	)
Net cash provided by (used in) financing activities		$	62.8			$	(38.6	)

	Nine Months Ended
	October 31,				October 25,
	2010				2009
		(In millions)
Net cash provided by operating activities		$	241.1		$	418.6
Net cash used in investing activities		$	(340.4	)	$	(235.6	)
Net cash provided by financing activities		$	103.3		$	13.8

●	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.

·	~~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.~~

a.	~~James C. Gaither~~
	~~Number of shares For~~	~~395,012,884~~
	~~Number of shares Withheld~~	~~647,570~~
~~Number of shares Abstaining~~		~~3,589,645~~
~~Number of Broker Non-Votes~~		~~68,425,042~~

b.	~~Jen-Hsun Huang~~
	~~Number of shares For~~	~~395,304,525~~
	~~Number of shares Withheld~~	~~438,441~~
~~Number of shares Abstaining~~		~~3,507,133~~
~~Number of Broker Non-Votes~~		~~68,425,042~~

c.	~~A. Brooke Seawell~~
	~~Number of shares For~~	~~394,774,347~~
	~~Number of shares Withheld~~	~~560,169~~
~~Number of shares Abstaining~~		~~3,915,583~~
~~Number of Broker Non-Votes~~		~~68,425,042~~

~~Number of shares voted For~~	~~467,054,082~~
~~Number of shares voted Against~~	~~389,980~~
~~Number of shares Abstaining~~	~~231,079~~
~~Number of Broker Non-Votes~~	0

~~Date: May 21, 2010~~
~~NVIDIA Corporation~~
~~By:~~	~~/s/ DAVID L. WHITE~~
	~~David L. White~~
	~~(Duly Authorized Officer and Principal Financial and Accounting Officer)~~

Date: December 7, 2010
	NVIDIA Corporation
By:	/s/ DAVID L. WHITE
	David L. White
	(Duly Authorized Officer and Principal Financial and Accounting Officer)