ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

such performance characteristics in order to be included in new system configurations. This requires that we do the following:

anticipate the features and functionality that consumers will demand;

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

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

price our products competitively; and

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

introduce the products to the market within the limited window for PC OEMs and add-in board and motherboard manufacturers.

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~~price our products competitively; and~~

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

As a result, we believe that significant expenditures for research and development will continue to be required in the future. The success of new product introductions will depend on several factors, including the following:

proper new product definition;

timely completion and introduction of new product designs;

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~~proper new product definition;~~

the ability of International Business Machines, or IBM, Taiwan Semiconductor Manufacturing Company, or TSMC, and any additional third-party manufacturers to effectively manufacture our new products in a timely manner;

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

the quality of any new products;

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

differentiation of new products from those of our competitors;

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~~the quality of any new products;~~

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

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

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

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~~market acceptance of our products and our customers’ products; and~~

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

Our strategy is to utilize the most advanced semiconductor process technology appropriate for our products and available from commercial third-party foundries. Use of advanced processes has in the past resulted in initial yield problems. New products that we introduce may not incorporate the features and functionality demanded by PC OEMs, add-in board and motherboard manufacturers and consumers of 3D graphics. In addition, we may not successfully develop or introduce new products in sufficient volumes within the appropriate time to meet both the PC OEMs’ design cycles and market demand. We have in the past experienced delays in the development of some new products. Our failure to successfully develop, introduce or achieve market acceptance for new 3D graphics products would harm our business. In particular, we ~~expect to introduce~~experienced delays in the introduction of graphics processors using our next generation technology during the second half of fiscal 2003 and any such delays in ~~such introduction~~the future or failure of these or other processors to meet or exceed specifications of competitive products could materially harm our business.

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

As ~~markets for~~ our 3D graphics processors develop and competition increases, we anticipate that product life cycles at the high end will remain short and average selling prices will continue to decline. In particular, we expect average selling prices and gross margins for our 3D graphics processors to decline as each product matures and as unit volume increases. As a result, we will need to introduce new products and enhancements to existing products to maintain overall average selling prices and gross margins. In order for our 3D graphics processors to achieve high volumes, leading PC OEMs and add-in board and motherboard manufacturers must select our 3D graphics processor for design into their products, and then successfully complete the designs of their products and sell them. We may be unable to successfully identify new product opportunities or to develop and bring to market in a timely fashion ~~any~~ new products. In addition, we cannot guarantee that ~~any~~ new products we develop will be selected for design into PC OEMs’ and add-in board and motherboard manufacturers’ products, that any new designs will be successfully completed or that any new products will be sold. As the complexity of our products and the manufacturing process for products increases, there is an increasing risk that we will experience problems with the performance of products and that there will be delays in the development, introduction or volume shipment of our products. We may experience difficulties related to the production of current or future products or other factors may delay the introduction or volume sale of new products we developed. In addition, we may be unable to successfully manage the production transition risks with respect to future products. Failure to achieve any of the foregoing with respect to future products or product enhancements could result in rapidly declining average selling prices, reduced margins and reduced demand for products or loss of market share. In addition, technologies developed by others

may render our 3D graphics products non-competitive or obsolete or result in our holding excess inventory, any of which would harm our business.

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

Products as complex as those offered by us may contain defects or failures when introduced or when new versions or enhancements to existing products are released. We have in the past discovered defects and incompatibilities with customers’ hardware in certain of our products and may experience delays or ~~lost~~loss of revenue to correct any new defects in the future. Errors in new products or releases after commencement of commercial shipments could result in loss of market share or failure to achieve market acceptance. Our products typically go through only one verification cycle prior to beginning volume production and distribution. As a result, our products may contain defects or flaws that are undetected prior to volume production and distribution. If these defects or flaws exist and are not detected prior to volume production and distribution, we may be required to reimburse customers for costs to repair or replace the affected products in the field. These costs could be significant and could adversely affect our business and operating results.

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

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

The risk of low yields is compounded by the offshore location of most of our manufacturers, increasing the effort and time required to identify, communicate and resolve manufacturing yield problems. Because of our potentially limited access to wafer fabrication capacity from our manufacturers, any decrease in manufacturing yields could result in an increase in our per unit costs and force us to allocate our available product supply among our customers. This could potentially harm customer relationships, as well as revenue and gross profit. Our wafer manufacturers may be unable to achieve or maintain acceptable manufacturing yields in the future. Our inability

to achieve planned yields from our wafer manufacturers could harm our business. We also face the risk of product recalls or product returns resulting from design or manufacturing defects that are not discovered during the manufacturing and testing process. In the event of a significant number of product returns due to a defect or recall, our business could suffer.

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

Our strategy is to utilize the most advanced process technology appropriate for our products and available from commercial third-party foundries. Use of advanced processes may have greater risk of initial yield problems. Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development. We continuously evaluate the benefits of migrating to smaller geometry process technologies in order to improve performance and reduce costs. We currently use ~~.15-micron~~0.15-micron process technology for the GeForce4, Quadro4, GeForce3, Quadro DCC, Xbox and nForce families of graphics processors, and we believe that the transition of our products to increasingly smaller geometries will be important to our competitive position. ~~We are currently evaluating and qualifying~~In November 2002, we introduced our newest flagship GPU, the ~~.13 micron~~GeForce FX 5800 Ultra, which is our first GPU to be manufactured in 0.13-micron process ~~technology for products that are estimated to begin commercial shipment later in our fiscal 2003.~~technology. Other companies in the industry have experienced difficulty in migrating to new manufacturing processes and, consequently, have suffered reduced yields, delays in product deliveries and increased expense levels. We have experienced and may continue to experience similar difficulties and the corresponding negative effects. Moreover, we are dependent on our relationships with our third-party manufacturers to migrate to smaller geometry processes successfully. We may be unable to migrate to new manufacturing ~~processes~~process technologies successfully or on a timely basis.

We may be unable to manage our growth and, as a result, may be unable to successfully implement our strategy.

Our rapid growth has placed, and is expected to continue to place, a significant strain on our managerial, operational and financial resources. As of ~~July 28, 2002,~~April 27, 2003, we had ~~1,414~~1,596 employees as compared to ~~1,123~~1,513 employees as of January ~~27, 2002.~~26, 2003. We expect that the number of our employees will increase over the next 12 months. Our future growth, if any, will depend on our ability to continue to implement and improve operational, financial and management information and control systems on a timely basis, as well as our ability to maintain effective cost controls. Further, we will be required to manage multiple relationships with various customers and other third parties. Our systems, procedures or controls may not be adequate to support our operations and our management may be unable to achieve the rapid execution necessary to successfully implement our strategy.

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

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

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

Our reliance on foreign third-party manufacturing, assembly, testing and packaging operations subjects us to a number of risks associated with conducting business outside of the United States, including the following:

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

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

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

longer payment cycles;

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

imposition of additional taxes and penalties;

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~~longer payment cycles;~~

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

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~~imposition of additional taxes and penalties;~~

other factors beyond our control, including terrorism and war, which may delay the shipment of our products.

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

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~~other factors beyond our control, including terrorism, which may delay the shipment of our products.~~

We also are subject to general political risks in connection with our international trade relationships. In addition, the laws of certain foreign countries in which our products are or may be manufactured or sold, including various countries in Asia, may not protect our products or intellectual property rights to the same extent as do the laws of the United States. This makes the possibility of piracy of our technology and products more likely.

Currently, all of our arrangements with third-party manufacturers provide for pricing and payment in U.S. dollars, and to date we have not engaged in any currency hedging activities, although we may do so in the future. Fluctuations in currency exchange rates could harm our business in the future.

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

The financial, political, economic and other uncertainties following the terrorist attacks upon the United States have led to a weakening of the global economy. Recent economic data, such as the United States unemployment rate and consumer confidence measures, appear to indicate that international hostilities involving the United States has further weakened the global economy. The reduction in business and investor confidence is also reflected in the weakening equity markets. Subsequent terrorist acts and/or the threat of future outbreak or continued escalation of hostilities involving the United States or other countries could adversely affect the growth rate of our revenue and have an adverse effect on our business, financial condition or results of operations. In addition, any escalation in these events or similar future events may disrupt our operations or those of our customers, distributors and suppliers, which could adversely affect our business, financial condition or results of operations.

Major health concerns, such as the spread of the Severe Acute Respiratory Syndrome illness, could harm our business.

We operate globally with sales offices and research and development activities in many countries, as well as, we depend on foreign foundries and independent contractors to manufacture, assemble and test our products. During the first quarter of fiscal 2004 our four largest customers accounted for approximately 58% of our total revenue. These customers are located in the Asia Pacific region. In addition, we primarily utilize TSMC, located in Taiwan, to produce our semiconductor wafers and utilize independent subcontractors to perform assembly, testing and packaging in Asia. Major health concerns, such as the spread of the Severe Acute Respiratory Syndrome illness, could adversely effect our global operations, our partners and our customers, which could harm our business.

Failure in operation or future enhancement or implementation of our enterprise resource planning system could harm our operations.

During ~~the first half of~~ fiscal 2003, we initiated an examination of SAP, ~~A.G.,~~ our current enterprise resource planning, or ERP, system to enhance our information systems in business, finance, operations and service. ~~We may implement~~During fiscal 2003, we implemented certain additional functionalities based upon the results of the ERP ~~examination.~~examination and we expect to implement additional functionalities in fiscal 2004. If we are not able to implement additional functionalities to our current ERP system or there are delays or downtime as a result of the implementation, the efficiency of our business applications ~~will~~and business operations could be harmed. We are heavily dependent upon the proper functioning of our internal systems to conduct our business. System failure or malfunctioning may result in

disruptions of operations and inability to process transactions. Our results of operations and financial position could be harmed if we encounter unforeseen problems with respect to system operations or future implementations.

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

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

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

the prohibition of stockholder action by written consent;

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

a classified board of directors; and

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

advance notice requirements for director nominations and stockholder proposals.

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~~a classified board of directors; and~~

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

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

NVIDIA.

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

In the past we have acquired and invested in other businesses that offered products, services and technologies that we believed would help expand or enhance our products and services or help expand our distribution channels. For any previous or future acquisition or investment, the following risks could impair our ability to grow our business and develop new products and, ultimately, could impair our ability to sell our products:

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

disruption of our ongoing businesses;

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~~difficulty in combining the technology, operations or workforce of the acquired business;~~

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

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~~disruption of our ongoing businesses;~~

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

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

possible impairment of relationships with employees and customers as a result of any integration of new businesses and management personnel.

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

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~~possible impairment of relationships with employees and customers as a result of any integration of new~~

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~~businesses and management personnel.~~

In addition, the consideration for any future acquisition could be paid in cash, shares of our common stock, or a combination of cash and common stock. If the consideration is paid with our common stock, existing stockholders would be further diluted.

Risks Related to Our Partners

We are dependent on a small number of customers and we are subject to order and shipment uncertainties.

We have only a limited number of customers and our sales are highly concentrated. We primarily sell our products to add-in board and motherboard manufacturers and CEMs, which incorporate graphics products in the boards they sell to PC OEMs and system builders. Sales to add-in board and motherboard manufacturers and CEMs are primarily dependent on achieving design wins with leading PC OEMs. The number of add-in board

and motherboard manufacturers, CEMs and leading PC OEMs is limited. We expect that a small number of add-in board and motherboard manufacturers and CEMs directly, and a small number of PC OEMs indirectly, will continue to account for a substantial portion of our revenue for the foreseeable future. As a result, our business could be harmed by the loss of business from PC OEMs or add-in board and motherboard manufacturers and CEMs. In addition, revenue from add-in board and motherboard manufacturers, CEMs and PC OEMs that have directly or indirectly accounted for significant revenue in past periods, individually or as a group, may not continue, or may not reach or exceed historical levels in any future period.

Our business may be harmed by instability in Asia due to the concentration of customers who are located or have substantial operations in Asia, including Taiwan. The People’s Republic of China and Taiwan have in the past experienced strained relations. A worsening of these relationships or the development of hostilities between the two

could result in disruptions in Taiwan and possibly other areas of Asia, which could harm our business. In addition, if relations between the U.S. and The People’s Republic of China become strained, our business could be harmed. While we believe political instability in Asia has not harmed our business, because of our reliance on companies with operations in Asia, continued economic and political instability in Asia might harm it.

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

Our accounts receivable are highly concentrated and make us vulnerable to adverse changes in our customers’ businesses and to downturns in the economy and the industry. We ~~recorded reserves~~maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure, excluding the amounts covered by credit insurance. If the financial condition of our customers or insurance carrier were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required which could adversely affect our ~~financial statements and~~operating results. Furthermore, there can be no assurance that we will be able to attain credit insurance in the future. We may have to record additional reserves or write-offs in the future, which could ~~adversely impact~~harm our business.

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

In the design and development of new products and product enhancements, we rely on third-party software development tools. While we currently are not dependent on any one vendor for the supply of these tools, some or all of these tools may not be readily available in the future. For example, we have experienced delays in the introduction of products in the past as a result of the inability of then available software development tools to fully simulate the complex features and functionalities of our products. The design requirements necessary to meet consumer demands for more features and greater functionality from 3D graphics products in the future may exceed the capabilities of the software development tools available to us. If the software development tools we use become unavailable or fail to produce designs that meet consumer demands, our business could suffer.

~~We may not be successful in producing the processors in volumes required for Microsoft’s Xbox and, even if successful we may not achieve profit margins consistent with management’s expectations.~~

~~Our Xbox IGP and MCP are new and complicated processors. Both processors have increased in complexity and features from what was contemplated at the time we entered into the agreement with Microsoft.~~ There can be no assurance that wethe Xbox program will be able to produce these processors in the volume necessary and within the required time frames or that the payments for these processors will be consistent with profit margins achieved on our other products. Finally, thereachieve long term commercial success.

There can be no assurance that the Xbox program will achieve long term commercial success, given the high level of competition in the game console ~~market.~~product line. During the first quarter of fiscal 2004, sales of Xbox processors comprised 9% of our overall revenue. If ~~any of these risks occur,~~the Xbox program is not successful, our business may be harmed.

~~We may not prevail in the arbitration with Microsoft over pricing of the Xbox chipset and even if we do prevail, there is no assurance that our business will not be materially harmed.~~

We are engaged with Microsoft in discussions related to pricing and volumes of the Xbox chipset. These discussions and our agreement contemplated use of a third party to resolve matters and on April 23, 2002 Microsoft submitted the matter to binding arbitration. Microsoft has requested that the arbitration panel require that we supply chipsets in whatever quantities are ordered by Microsoft. The arbitration panel has issued an interim ruling that we must supply Microsoft’s reasonable requirements of chipsets, but no minimum or maximum amount has been set overall or for any particular period. Microsoft has also asked for damages for alleged violations of the agreement and requested that the arbitration panel reduce chipset prices paid by Microsoft. We have also requested pricing relief regarding our chipsets and asserted claims for damages. The arbitration panel will consider all these claims during the arbitration. For sales of the Xbox processors, we have deferred revenue in an amount equal to the difference between the price being paid by Microsoft and the price Microsoft claims it should be paying. We expect that we will continue to defer revenue related to the disputed pricing and volume discount for future sales of these processors until final resolution of the matter. This amount was approximately $46.2 million as of July 28, 2002. The arbitration is being conducted in New York by a panel under the rules of the American Arbitration Association. We expect to conclude the arbitration before June 30, 2003.

There can be no assurance that we will prevail in the arbitration or continue to supply graphics and other processors for the Xbox. If we do not prevail, we may (i) be compelled to deliver Xbox processors at reduced pricing, resulting in reduced gross margins, or a loss, on such processors; (ii) be required to reduce production and delivery of other products in order to satisfy obligations to Microsoft; (iii) be required to pay significant damages to

Microsoft; or (iv) be subject to other remedies, such as licenses to our intellectual property, that could have a material adverse impact on our business. Even if we do prevail, there can be no assurance that our business will not be materially harmed.

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

We do not manufacture the semiconductor wafers used for our products and do not own or operate a wafer fabrication facility. Our products require wafers manufactured with state-of-the-art fabrication equipment and

techniques. We primarily utilize TSMC to produce our semiconductor wafers and utilize independent subcontractors to perform assembly, testing and packaging. We depend on these suppliers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs, to produce products of acceptable quality and at acceptable manufacturing yields, and to deliver those products to us on a timely basis. These manufacturers may be unable to meet our near-term or long-term manufacturing requirements. We obtain manufacturing services on a purchase order basis and TSMC has no obligation to provide us with any specified minimum quantities of product. TSMC fabricates wafers for other companies, including certain of our competitors, and could choose to prioritize capacity for other users or reduce or eliminate deliveries to us on short notice. Because the lead-time needed to establish a strategic relationship with a new manufacturing partner could be several quarters, there is no readily available alternative source of supply for any specific product. We believe that long-term market acceptance for our products will depend on reliable relationships with TSMC and any other manufacturers used by us to ensure adequate product supply to respond to customer demand.

Our wafer requirements represent a significant portion of the total production capacity of TSMC. Although our products are designed using TSMC’s process design rules, TSMC may be unable to achieve or maintain acceptable yields or deliver sufficient quantities of wafers on a timely basis and/or at an acceptable cost. Additionally, TSMC may not continue to devote resources to the production of our products, or to advance the process design technologies on which the manufacturing of our products are based. Any difficulties like these would harm our business.

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

There can be no assurance that IBM will be able to produce wafers of acceptable quality and with acceptable manufacturing yield and deliver those wafers to us and our independent assembly and testing subcontractors on a timely basis.

On March 26, 2003, we announced that we have formed a multi-year strategic alliance under which IBM will manufacture our next-generation GeForce GPUs. As part of the agreement, we will gain access to IBM’s suite of foundry services and manufacturing technologies, including power-efficient copper wiring, and a roadmap that is designed to lead to 65nm (nanometer; a billionth of a meter) in the next several years, giving us valuable tools to advance our GPUs. IBM plans to begin manufacturing the next-generation GeForce graphics processor this summer at IBM’s plant in East Fishkill, New York.

During the development of our relationship with IBM, our manufacturing yields and product performance could suffer due to difficulties associated with adapting our technology and product design to the proprietary process technology and design rules of IBM. Any decrease in manufacturing yields could result in an increase in our per unit costs and force us to allocate our available product supply among our customers. This could potentially harm customer relationships as well as revenue and gross profit. We also face the risk of product recalls or product returns resulting from design or manufacturing defects that are not discovered during the manufacturing and testing process. In the event of a significant number of product returns due to a defect or recall, our business could suffer.

We are dependent on third parties for assembly, testing and packaging of our products.

Our graphics processors are assembled and tested by Siliconware Precision Industries Company Ltd., Amkor Technology, ChipPAC Incorporated and Advanced Semiconductor Engineering. We do not have long-term agreements with any of these subcontractors. As a result of our dependence on third-party subcontractors for assembly, testing and packaging of our products, we do not directly control product delivery schedules or

product quality. Any product shortages or quality assurance problems could increase the costs of manufacture, assembly or testing of our products and could harm our business. Due to the amount of time typically required to qualify assemblers and testers, we could experience significant delays in the shipment of our products if we are required to find alternative third parties to assemble or test our products or components. Any delays in delivery of our products could harm our business.

Risks Related to Our Competition

The 3D graphics industry is highly competitive and we may be unable to compete.

The market for 3D graphics processors for PCs in which we compete is intensely competitive and is characterized by rapid technological change, evolving industry standards and declining average selling prices. We believe that the principal competitive factors in this market are performance, breadth of product offerings, access to customers and distribution channels, backward-forward software support, conformity to industry standard APIs, manufacturing capabilities, price of graphics processors and total system costs of add-in boards and motherboards. We expect competition to increase both from existing competitors and new market entrants with products that may be less costly than our 3D graphics processors, or may provide better performance or additional features not provided by our products. We may be unable to compete successfully in the emerging PC graphics market.

Our primary source of competition is from companies that provide or intend to provide 3D graphics solutions for the PC market. Our competitors include the following:

suppliers of integrated core logic chipsets that incorporate 3D graphics functionality as part of their existing solutions, such as Intel, Silicon Integrated Systems, ATI Technologies Inc. and VIA Technologies, Inc.;

suppliers of graphics add-in boards that utilize their internally developed graphics chips, such as ATI Technologies Inc., Creative Technology and Matrox Electronics Systems Ltd.;

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suppliers of integrated core logic chipsets that incorporate 2D and 3D graphics functionality as part of their existing solutions, such as Intel, Silicon Integrated Systems and Via Technologies, Inc., or Via;

suppliers of mobile graphics processors that incorporate 3D graphics functionality as part of their existing solutions, such as ATI Technologies Inc., Trident Microsystems, Inc. and the joint venture of a division of SONICblue Incorporated (formerly S3 Incorporated) and VIA Technologies, Inc.; and

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~~suppliers of graphics add-in boards that utilize their internally developed graphics chips, such as ATI Technologies Inc. and Matrox Electronics Systems Ltd.;~~

companies that have traditionally focused on the professional market and provide high end 3D solutions for PCs and workstations, including 3Dlabs (a Creative Technology company) and ATI Technologies Inc.

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suppliers of mobile graphics processors that incorporate 2D or 3D graphics functionality as part of their existing solutions, such as ATI Technologies, Trident Microsystems, Inc. and the joint venture of a division of SONICblue Incorporated (formerly S3 Incorporated) and Via Technologies; and

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~~companies that have traditionally focused on the professional market and provide high end 3D solutions for PCs and workstations, including 3Dlabs and ATI Technologies Inc.~~

If and to the extent we offer products outside of the 3D graphics processor market, we may face competition from some of our existing competitors as well as from companies with which we currently do not compete. We cannot accurately predict if we will compete successfully in any new markets we may enter.

We may not successfully compete with Intel in the integrated chipset ~~market.~~product line.

It is projected by analysts that integrated chipsets are likely to become a majority share of the PC graphics market. We have recently introduced and begun shipment of the ~~nForce~~nForce2 platform processor, anour second generation integrated 3D graphics chipset. The nForce platform processor is initially designed to support microprocessors produced by AMD. Intel is the dominant supplier of integrated 3D graphics ~~chipsets and has commenced production of an integrated chipset for its Pentium 4 microprocessor.~~chipsets. Intel has significantly greater resources than we do, and the nForce platform processor, or other 3D graphics products that we may introduce, may not compete effectively against Intel’s current chipset products or its future products, either in terms of price or performance.

In addition, due to the widespread industry acceptance of Intel’s microprocessor architecture and interface architecture, including its accelerated graphics port architecture, or AGP, Intel exercises significant influence over the PC industry and over companies developing products for such architecture. Any significant

modifications by Intel to the AGP, the microprocessor or core logic components or other aspects of the PC microprocessor architecture could result in incompatibility with our technology, which would harm our business. In addition, any delay in the public release of information relating to modifications like this could harm our business.

In addition to its influence over the PC architecture, Intel has asserted intellectual property rights in various PC architecture interfaces. For example, as a result of patents held by Intel, it has asserted that companies wishing to develop a chipset compatible with the Pentium 4 microprocessor or similar microprocessors obtain a license from Intel. We believe that the principal competitive factors in the market are performance, breadth of product offerings, access to customers and distribution channels, backward-forward software support, conformity to industry standard APIs, manufacturing capabilities, price of graphics processors and total system costs of add-in boards and motherboards. In September 2001 Intel filed a patent infringement suit against ~~Via~~VIA Technologies, Inc. with respect to a ~~Via~~VIA Technologies, Inc. chipset for the Pentium 4. We do not have a license from Intel for such a chipset.

We expect Intel to continue to do the following:

invest heavily in research and development and continue development of integrated 3D graphics products;

maintain its position as the largest manufacturer of PC microprocessors;

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~~invest heavily in research and development and continue development of integrated 3D graphics products;~~

use its intellectual property position with respect to the PC microprocessor and architecture to defend its position in 3D graphics, including the filing of patent infringement suits against competitors;

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~~maintain its position as the largest manufacturer of PC microprocessors;~~

follow business practices in its PC business, which strongly encourage use of Intel integrated chipsets;

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~~use its intellectual property position with respect to the PC microprocessor and architecture to~~

increasingly dominate the PC platform; and

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~~defend its position in 3D graphics, including the filing of patent infringement suits against competitors;~~

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~~follow business practices in its PC business, which strongly encourage use of Intel integrated chipsets;~~

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~~increasingly dominate the PC platform; and~~

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~~promote its product offerings through advertising campaigns designed to engender brand loyalty among~~

promote its product offerings through advertising campaigns designed to engender brand loyalty among PC users.

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

Our future success will depend in large part on achieving design wins, which entails having our existing and future products chosen as the 3D graphics processors for hardware components or subassemblies designed by PC OEMs and add-in board and motherboard manufacturers. Our add-in board and motherboard manufacturers and major OEM customers typically introduce new system configurations as often as twice per year, generally based on spring and fall design cycles. Accordingly, our existing products must have competitive performance levels or we must timely introduce new products with such performance characteristics in order to be included in new system configurations. Our failure to achieve one or more design wins would harm our business. The process of being qualified for inclusion in a PC OEM’s product can be lengthy and could cause us to miss a cycle in the demand of end users for a particular product feature, which also could harm our business.

Our ability to achieve design wins also depends in part on our ability to identify and ensure compliance with evolving industry standards. Unanticipated changes in industry standards could render our products incompatible with products developed by major hardware manufacturers and software developers, including Intel and Microsoft. This would require us to invest significant time and resources to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industry standards for a significant period of time, our ability to achieve design wins could suffer.

Risks Related to Financial and Market Conditions

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

During ~~the first half of~~ fiscal 2003, we derived most of our revenue from the sale of products for use in the desktop PC market, from professional workstations to low-cost PCs. We expect to continue to derive most of our revenue from the sale or license of products for use in the desktop PC market in the next several years. The PC market is characterized by rapidly changing technology, evolving industry standards, frequent new product introductions and significant price competition. These factors result in short product life cycles and regular reductions of average selling prices over the life of a specific product. A reduction in sales of PCs, or a reduction in the growth rate of PC sales, will reduce demand for our products. Moreover, changes in demand could be large and sudden. Since PC manufacturers often build inventories during periods of anticipated growth, they may be left with excess inventories if growth slows or if they have incorrectly forecast product transitions. In these cases, PC manufacturers may abruptly suspend substantially all purchases of additional inventory from suppliers like us until the excess inventory has been absorbed. The ~~recent~~ slowing of both the ~~economy in the U.S.~~domestic and international ~~regions, which~~economy has ~~negatively impacted some PC manufacturers and~~ led to ~~some reductions~~a reduction in the demand for PCs ~~led in the quarter ended July 28, 2002~~and to ~~reductions~~a reduction in inventory purchases by PC manufacturers, ~~and~~which adversely impacted our revenue during ~~the period.~~fiscal 2003. Any continued reduction in the demand for PCs generally, or for a particular product that incorporates our 3D graphic processors, could harm our business.

The acceptance of next generation products in business PC 3D graphics may not continue to develop.

Our success will depend in part upon the demand for performance 3D graphics for business PC applications. The market for performance 3D graphics on business PCs has only recently begun to emerge and is dependent on the future development of, and substantial end-user and OEM demand for, 3D graphics functionality. As a result, the market for business PC 3D graphics computing may not continue to develop or may not grow at a rate sufficient to support our business. The development of the market for performance 3D graphics in business PCs will in turn depend on the development and availability of a large number of business PC software applications that support or

take advantage of performance 3D graphics capabilities. Currently, there are only a limited number of software applications like this, most of which are games, and a broader base of software applications may not develop in the near term or at all. Consequently, a broad market for full function performance 3D graphics on business PCs may not develop. Our business prospects will suffer if the market for business PC 3D graphics fails to develop or develops more slowly than expected.

Our 3D graphics solution may not continue to be accepted by the PC market.

Our success will depend in part upon continued broad adoption of our 3D graphics processors for high performance 3D graphics in PC applications. The market for 3D graphics processors has been characterized by unpredictable and sometimes rapid shifts in the popularity of products, often caused by the publication of competitive industry benchmark results, changes in dynamic random memory devices pricing and other changes in the total system cost of add-in boards, as well as by severe price competition and by frequent new technology and product introductions. Only a small number of products have achieved broad market acceptance and such market acceptance, if achieved, is difficult to sustain due to intense competition. Since the PC market is our core business, our business would suffer if for any reason our current or future 3D graphics processors do not continue to achieve widespread acceptance in the PC market. If we are unable to complete the timely development of products or if we were unable to successfully and cost-effectively manufacture and deliver products that meet the requirements of the PC market, our business would be harmed.

The semiconductor industry is cyclical in nature and an industry downturn could harm our business.

The semiconductor industry historically has been characterized by the following factors:

rapid technological change;

cyclical market patterns;

•

~~rapid technological change;~~

significant average selling price erosion;

•

~~cyclical market patterns;~~

fluctuating inventory levels;

•

~~significant average selling price erosion;~~

alternating periods of overcapacity and capacity constraints; and

•

~~fluctuating inventory levels;~~

variations in manufacturing costs and yields and significant expenditures for capital equipment and product development.

•

~~alternating periods of overcapacity and capacity constraints; and~~

•

~~variations in manufacturing costs and yields and significant expenditures for capital equipment and product development.~~

In addition, the industry has experienced significant economic downturns at various times, characterized by diminished product demand and accelerated erosion of average selling prices. We may experience substantial period-to-period fluctuations in results of operations due to general semiconductor industry conditions.

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

The price of our common stock has fluctuated greatly. These price fluctuations have been rapid and severe. The price of our common stock may continue to fluctuate greatly in the future due to factors that are non-company specific, such as the decline in the U.S. economy, acts of terror against the U.S., war or due to a variety of company specific factors, including quarter to quarter variations in our operating results, shortfalls in revenue or earnings from levels expected by securities analysts and the other factors discussed above in these risk factors. In the past, following periods of volatility in the market price of a company’s stock, securities class action litigation has been initiated against the issuing company. Since February 2002, multiple securities class action lawsuits and several derivative suits have been filed against us. We expect that this litigation, whether or not resolved favorably, may result in substantial cost and a diversion of management’s attention and resources, which could harm our revenues and earnings. Any adverse determination in this litigation could also subject us to significant liabilities. See Part II, Item 1 “Legal Proceedings” ~~and Note 11~~ of ~~the Notes to Condensed Consolidated Financial Statements~~this Form 10-Q for a description of this litigation.

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

For additional information regarding risks associated with the market value of portfolio investments and interest rates, see Item 3 “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk.”

Risks Related to Intellectual Property, Litigation and Government Action

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

The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights and positions, which has resulted in protracted and expensive litigation. The 3D graphics market in particular has been characterized recently by the aggressive pursuit of intellectual property positions, and we expect our competitors to continue to pursue aggressive intellectual property positions. In addition, from time to time we receive notices or are included in legal actions alleging that we have infringed patents or other intellectual property rights owned by third parties. We expect that, as the number of issued hardware and software patents increases, and as competition in our ~~markets~~product lines intensifies, the volume of intellectual property infringement claims may increase. If infringement claims are made against us, we may seek licenses under the claimants’ patents or other intellectual property rights. However, licenses may not be offered at all or on terms acceptable to us, particularly by competitors. The failure to obtain a license from a third party for technology used by us could cause us to incur substantial liabilities and to suspend the manufacture of and sale of one or more products, which could reduce our revenues and harm our business. Furthermore, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. We have agreed to indemnify certain customers for claims of infringement arising out of sale of our products.

Litigation against us or our customers concerning infringement would likely result in significant expense to us and divert the efforts of our technical and management personnel.

We are currently subject to claims of patent infringement, and we may be subject to patent infringement claims or suits brought by other parties in the future. We do not believe that current actions will have a material impact on our business or financial condition. However, these claims and any future lawsuits could divert our resources and result in the payment of substantial damages.

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

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

Future actions by the SEC or other governmental or regulatory agencies and resolution of related litigation arising out of the restatement of our financial statements or other matters could harm our business.

The ~~SEC~~ staff of the Enforcement Division of the Securities & Exchange Commission (“SEC”) informed us in January 2002 that it had concerns relating to certain accounting matters and that the SEC along with the U.S. Attorney’s Office for the Northern District of California had authorized ~~a private investigation~~investigations into such matters. In accordance with the suggestion and advice of the SEC staff, we launched a review of these matters. On April 29, 2002, we announced that the Audit Committee of our Board of Directors had, with assistance from the law firm of Cooley Godward LLP and forensic auditors from the accounting firm of KPMG LLP, concluded its review and determined that it was appropriate to restate our financial statements for fiscal 2000, 2001 and the first three quarters of fiscal 2002. The Audit Committee has worked and continues to work in cooperation with the ~~SEC and has provided~~SEC. After receiving a Wells notice indicating the SEC staff intended to recommend to the SEC that an enforcement action be initiated, we reached an agreement in principle with ~~extensive information~~the SEC staff in April 2003 that would resolve the SEC’s investigation of us in matters related to the restatement. The agreement is subject to final approval of the SEC. Under the terms of the agreement in principle, NVIDIA, without admitting or denying liability or wrongdoing, would agree to an administrative cease and desist order prohibiting any future violations of certain non-fraud financial reporting, books and records, and internal control provisions of the federal securities laws. We would not be required to pay any fines or penalties. The documentation of the agreement and the ~~conclusions~~SEC’s review of the ~~review.~~agreement may take several weeks or months to complete. Further, there can be no assurance that the agreement will be approved by the SEC. Notwithstanding the above, actions by the SEC or other governmental or regulatory agencies with respect to us or our personnel arising out of the restatement of our financial statements or other matters may take significant time, may be expensive and may divert management’s attention from other business concerns and harm our business. In addition, a number of lawsuits have been filed against us following our announcement on February 14, 2002 of the internal review. The defense of, and any resolution of such lawsuits may require significant expenditures and materially impact our business and results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date (the “Evaluation Date”) within 90 days before the filing date of this quarterly report, have ~~recently evaluated~~concluded that, as of the Evaluation Date, our ~~internal controls. During the three month period ending July 28, 2002 there~~disclosure controls and procedures were adequate and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.

There were no significant ~~corrective actions taken by us or other~~ changes ~~made to these~~in our internal controls ~~nor do we believe there were changes~~or, to our knowledge, in other factors that could significantly affect ~~these~~our disclosure controls and procedures subsequent to the ~~date~~Evaluation Date.

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 ~~our evaluation.~~

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. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On February 19, 2002 an NVIDIA stockholder, Dominic Castaldo, on behalf of himself and purportedly on behalf of a class of our stockholders, filed an action in the United States District Court for the Northern District of California ~~or the Northern District,~~(the “Northern District”) against NVIDIA and certain current and former NVIDIA officers, alleging violations of the federal securities laws arising out of our announcement on February 14, 2002 of an internal investigation of certain accounting matters. ~~As of July 28, 2002, approximately~~Approximately 13 similar actions ~~or the Federal Class Actions,~~ were filed in the Northern District, one additional individual action was filed in the Southern District (together, the “Federal Class Actions”), along with three related derivative actions against us, certain of our current and former executive officers, directors and our independent auditors, KPMG LLP, in California Superior Court and in Delaware Chancery Court ~~collectively~~(collectively the ~~Actions.~~“Actions”). The two related derivative actions filed in California Superior Court have been ~~consolidated.~~consolidated and are currently stayed pursuant to a voluntary stipulation agreement. The Actions allege claims in connection with various alleged statements and omissions to the public and to the securities markets and seek damages together with interest and reimbursement of costs and expenses of the litigation. The derivative actions also seek disgorgement of alleged profits from insider trading by officers and directors. The Actions are in the preliminary stages. The Federal Class Actions have been consolidated and lead plaintiffs appointed. ~~The~~Plaintiffs filed a consolidated amended complaint ~~should be~~and, in response, NVIDIA filed ~~by September 10, 2002.~~a motion to dismiss. On March 28, 2003 the court granted NVIDIA’s motion and dismissed the consolidated amended complaint as to all claims and defendants with forty-five days leave to amend. NVIDIA has also filed a motion to dismiss the derivative action filed in Delaware. A hearing on this motion was held April 23, 2003. On May 5, 2003, the Delaware Court granted NVIDIA’s motion and dismissed the derivative action with prejudice. We are obligated to indemnify our officers and directors, to the extent permitted by the law, in connection with the Actions and have insurance for such individuals, to the extent of the limits of the applicable insurance policies and subject to potential reservations of rights. We intend to vigorously defend these Actions. We are unable, however, to predict the ultimate outcome of the Actions. There can be no assurance we will be successful in defending the Actions, and if we are unsuccessful we may be subject to significant damages. Even if we are successful, defending the Actions is likely to be expensive and may divert management’s attention from other business concerns and harm our business.

The ~~SEC~~ staff of the Enforcement Division of the Securities & Exchange Commission (“SEC”) informed us in January 2002 that it had concerns relating to certain accounting matters and that the SEC along with the U.S. Attorney’s Office for the Northern District of California had authorized ~~a private investigation~~investigations into such matters. In accordance with the suggestion and advice of the SEC staff, we launched a review of these matters. On April 29, 2002, we announced that the Audit Committee of our Board of Directors had, with assistance from the law firm of Cooley Godward LLP and forensic auditors from the accounting firm of KPMG LLP, concluded its review and determined that it was appropriate to restate our financial statements for fiscal 2000, 2001 and the first three quarters of fiscal 2002. The Audit Committee has worked and continues to work in cooperation with the ~~SEC and has provided~~SEC. After receiving a Wells notice indicating the SEC staff intended to recommend to the SEC that an enforcement action be initiated, we reached an agreement in principle with ~~extensive information~~the SEC staff in April 2003 that would resolve the SEC’s investigation of us in matters related to the restatement. The agreement is subject to final approval of the SEC. Under the terms of the agreement in principle, NVIDIA, without admitting or denying liability or wrongdoing, would agree to an administrative cease and desist order prohibiting any future violations of certain non-fraud financial reporting, books and records, and internal control provisions of the federal securities laws. We would not be required to pay any fines or penalties. The documentation of the agreement and the ~~conclusions~~SEC’s review of the ~~review. Actions~~agreement may take several weeks or months to complete. Further, there can be no assurance that the agreement will be approved by the SEC. Notwithstanding the above, actions by the SEC or other governmental or regulatory agencies with respect to us or our personnel arising out of the restatement of our financial statements or other matters may take significant time, may be expensive and may divert management’s attention from other business concerns and harm our business.

~~We are engaged with Microsoft in discussions related to pricing~~

On April 18, 2001, we completed the purchase of certain assets of 3dfx, including patents and ~~volumes~~patent applications. Under the terms of the ~~Xbox chipset. These discussions~~Asset Purchase Agreement, the cash consideration due at the closing was

$70.0 million, less $15.0 million that was loaned to 3dfx pursuant to a Credit Agreement dated December 15, 2000. The Asset Purchase Agreement also provides, subject to the other provisions thereof, that if 3dfx certifies to our satisfaction all its debts and other liabilities have been provided for, then we are obligated to pay 3dfx two million shares of NVIDIA common stock. If 3dfx cannot make such a certification, but instead certifies to our ~~agreement contemplated use of~~satisfaction that its debts and liabilities can be satisfied for less than $25.0 million, then 3dfx can elect to receive a third party to resolve matters and on April 23, 2002 Microsoft submitted the matter to binding arbitration. Microsoft requested that the arbitration panel require that we supply chipsets in whatever quantities are ordered by Microsoft. The arbitration panel has issued an interim ruling that we must supply Microsoft’s reasonable requirements of chipsets, but no minimum or maximum amount has been set overall or for any particular period. Microsoft has also asked for damages for alleged violations of the agreement and requested that the arbitration panel reduce chipset prices paid by Microsoft. We have also requested pricing relief regarding our chipsets and asserted claims for damages. The arbitration panel will consider all these claims during the arbitration. For sales of the Xbox processors, we have deferred revenue in an amountcash payment equal to the ~~difference between~~amount of such debts and liabilities and receive a reduced number of shares of our common stock, with such reduction calculated by dividing the ~~price being paid~~cash payment by ~~Microsoft~~$25.00 per share. If 3dfx cannot certify that all of its debts and liabilities have been provided for, or can be satisfied, for less than $25.0 million, we are not obligated under the agreement to pay any additional consideration for the assets. On October 15, 2002, 3dfx filed for Chapter 11 bankruptcy protection. We believe that the bankruptcy filing by 3dfx will allow a determination of the full number and scope of 3dfx’s debts and liabilities. NVIDIA may be obligated under the Asset Purchase Agreement to pay 3dfx the contingent consideration following this determination, subject to offsets for NVIDIA’s claims against 3dfx arising from the Asset Purchase Agreement. On March 12, 2003, we were served with a complaint by the Trustee for 3dfx seeking, among other things, additional payment for the purchased assets and the ~~price Microsoft claims it should be paying. We expect that we will continue to defer revenue related to the disputed pricing~~assumption by us of 3dfx’s liabilities. In addition, Carlyle Fortran Trust and ~~volume discount for future sales~~CarrAmerica, former landlords of ~~these processors until final resolution~~3dfx, have filed suits against us seeking payment of the ~~matter. This amount was approximately $46.2 million as of July 28, 2002. The arbitration is being conducted in New York~~rents due by ~~a panel under the rules of the American Arbitration Association. We expect to conclude the arbitration before June 30, 2003.~~

3dfx.

~~material adverse impact on our business. Even if we do prevail, there can be no assurance that our business will not be materially harmed.~~

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

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the Annual Meeting of Stockholders held on July 11, 2002, the following proposals were adopted by the margin indicated. Proxies for the Annual Meeting were solicited pursuant section 14(a) of the Securities Exchange Act of 1934, as amended, and there was no solicitation in opposition of managements’ solicitation.

~~(a) To elect two directors, Harvey C. Jones and William J. Miller, to hold office until the 2005 Annual Meeting of Stockholders.~~

Nominee

For

Withheld
Harvey C. Jones    134,957,180    805,809
William J. Miller    134,082,932    1,680,057

~~(b) To approve an amendment to our Amended and Restated Certificate of Incorporation to increase the authorized number of shares of Common Stock from 500,000,000 to 1,000,000,000.~~


~~For~~		~~108,169,702~~
~~Against~~		~~27,132,337~~
~~Abstain~~		~~460,950~~

~~(c) To ratify the selection of KPMG LLP as our independent accountants for our fiscal year ended January 26, 2003.~~


~~For~~		~~132,687,367~~
~~Against~~		~~2,625,068~~
~~Abstain~~		~~450,554~~

Not applicable.

ITEM 5. OTHER INFORMATION

~~Not applicable.~~

Consistent with Section 10A(i)(2) of the Securities Exchange Act of 1934, as added by Section 202 of the Public Company Accounting Reform and Investor Protection Act of 2002, NVIDIA is responsible for disclosing the nature of the non-audit services approved by our Audit Committee during a quarter to be performed by KPMG LLP, our independent auditor. Non-audit services are services other than those provided by KPMG LLP in connection with an audit or a review of NVIDIA’s financial statements. During the first quarter of fiscal 2004, our Audit Committee did not approve any new or recurring non-audit engagements with KPMG LLP.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

~~3.4~~ 99.1		~~Certificate of Amendment of Amended and Restated Certificate of Incorporation.~~
~~99.1~~		Certification of Chief Executive Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002.

99.2		Certification of Chief Financial Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002.

(b) Reports on Form 8-K

~~(i)~~

~~NVIDIA filed a Current Report on Form 8-K, dated April 29, 2002 and filed April 29, 2002, to report the restatement.~~

~~(ii)~~

~~NVIDIA filed a Current Report on Form 8-K, dated April 23, 2002 and filed April 29, 2002, to report arbitration over pricing of the Xbox chipset with Microsoft.~~

~~(iii)~~

~~NVIDIA filed a Current Report on Form 8-K, dated May 1, 2002 and filed May 1, 2002, to report additional information regarding the restatement.~~

None.

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~September 10, 2002.~~

May 22, 2003.

NVIDIA CORPORATION

By:		/s/ M~~ARV~~ARVIN D. BURKETT
		~~Marv~~Marvin D. Burkett
		Chief Financial Officer
		(PrincipalFinancial and Accounting Officer)

CERTIFICATIONS

I, Jen-Hsun Huang, certify that:

~~I have reviewed this quarterly report on Form 10-Q of NVIDIA Corporation;~~

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

1. I have reviewed this quarterly report on Form 10-Q of NVIDIA Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: ~~September 10, 2002~~

May 22, 2003


		/s/ JEN-HSUN HUANG
		Jen-Hsun Huang President and Chief Executive Officer

I, ~~Marv~~Marvin D. Burkett, certify that:

~~I have reviewed this quarterly report on Form 10-Q of NVIDIA Corporation;~~

1. I have reviewed this quarterly report on Form 10-K of NVIDIA Corporation;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: ~~September 10, 2002~~

May 22, 2003


		/s/S/ M~~ARV~~ARVIN D. BURKETT
		~~Marv~~Marvin D. Burkett Chief Financial Officer

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

		Page
PART I: FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	~~PART I: FINANCIAL INFORMATION~~
~~Item 1.~~	~~Condensed Consolidated Financial Statements (Unaudited)~~
	Condensed Consolidated Balance Sheets as of ~~July 28, 2002~~April 27, 2003 and January ~~27, 2002~~26, 2003	1

	Condensed Consolidated Statements of Income for the three ~~and six~~ months ended ~~July~~April 27, 2003 and April 28, 2002 ~~and July 29, 2001~~	2

	Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~July~~April 27, 2003 and April 28, 2002 ~~and July 29, 2001~~	3

	Notes to Condensed Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21 20

Item 4.	Controls and Procedures	33 34

			PART II: OTHER INFORMATION

Item 1.
~~Item 1.~~	Legal Proceedings	33 35

Item 2.	Changes in Securities and Use of Proceeds	34 36

Item 3.	Defaults Upon Senior Securities	34 36

Item 4.	Submission of Matters to a Vote of Security Holders	34 36

Item 5.	Other Information	34 36

Item 6.	Exhibits and Reports on Form 8-K	35 36

Signature		36 37

Certifications		37 38

	July 28, 2002		January 27, 2002
ASSETS
Current assets:
Cash and cash equivalents	$	246,816	$	333,000
Restricted cash		—		7,000
Marketable securities		579,595		458,377
Accounts receivable, net		133,038		147,348
Inventories		285,350		213,877
Prepaid expenses and other current assets		13,252		8,078
Prepaid and deferred taxes		66,429		66,429

Total current assets		1,324,480		1,234,109
Property and equipment, net		143,578		120,128
Deposits and other assets		10,593		11,897
Prepaid and deferred taxes		56,041		55,921
Goodwill and intangible assets, net		80,462		81,119

	$	1,615,154	$	1,503,174

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	165,395	$	214,019
Accrued liabilities		186,157		141,210
Current portion of note and capital lease obligations		5,607		3,896
Interest payable on convertible debenture		4,117		4,176
Deferred revenue		62,420		70,193

Total current liabilities		423,696		433,494
Capital lease obligations, less current portion		7,926		5,861
Long-term convertible debenture		300,000		300,000
Stockholders’ equity:
Common stock		153		150
Additional paid-in capital		485,762		456,621
Accumulated other comprehensive income, net		2,179		108
Retained earnings		395,438		306,940

Total stockholders’ equity		883,532		763,819

	$	1,615,154	$	1,503,174

	April 27, 2003		January 26, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	278,796	$	346,994
Marketable securities		771,542		681,419
Accounts receivable, net		155,751		154,501
Inventories		165,785		145,046
Prepaid expenses and other current assets		17,666		12,393
Prepaid and deferred taxes		11,249		11,249

Total current assets		1,400,789		1,351,602
Property and equipment, net		148,904		135,152
Deposits and other assets		12,171		10,473
Prepaid and deferred taxes		43,317		43,317
Goodwill		55,139		54,227
Intangible assets, net		27,213		22,244

	$	1,687,533	$	1,617,015


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	234,437	$	141,129
Accrued liabilities		175,344		228,467
Current portion of note and capital lease obligations		6,203		5,676
Interest payable on convertible debenture		525		4,176

Total current liabilities		416,509		379,448
Capital lease obligations, less current portion		4,194		4,880
Long-term convertible debenture		300,000		300,000
Long-term liabilities		6,000		—
Stockholders’ equity:
Common stock		159		158
Additional paid-in capital		539,031		531,030
Accumulated other comprehensive income, net		4,154		3,760
Retained earnings		417,486		397,739

Total stockholders’ equity		960,830		932,687

	$	1,687,533	$	1,617,015

	Three Months Ended				Six Months Ended
	July 28, 2002		July 29, 2001		July 28, 2002		July 29, 2001
			(As restated – see Note 2)				(As restated – see Note 2)
Revenue	$	427,285	$	259,875	$	1,010,190	$	500,807
Cost of revenue		327,983		157,636		703,723		304,348

Gross profit		99,302		102,239		306,467		196,459

Operating expenses:
Research and development		57,229		33,894		109,721		66,487
Sales, general and administrative		35,908		20,278		73,390		39,400
Amortization of goodwill		—		3,236		—		3,611
Acquisition related charges		—		457		—		10,030

Total operating expenses		93,137		57,865		183,111		119,528

Operating income		6,165		44,374		123,356		76,931
Interest and other income, net		1,340		2,663		3,071		8,178

Income before income tax expense		7,505		47,037		126,427		85,109
Income tax expense		2,251		14,111		37,928		25,533

Net income	$	5,254	$	32,926	$	88,499	$	59,576

Basic net income per share	$	0.03	$	0.23	$	0.58	$	0.42
Diluted net income per share	$	0.03	$	0.19	$	0.51	$	0.35
Shares used in basic per share computation		152,296		141,876		151,490		140,259
Shares used in diluted per share computation		168,770		170,302		172,628		168,321

	Three Months Ended
	April 27, 2003		April 28, 2002
Revenue	$	404,983	$	582,905
Cost of revenue		278,415		375,740

Gross profit		126,568		207,165
Operating expenses:
Research and development		59,310		52,492
Sales, general and administrative		40,910		37,482

Total operating expenses		100,220		89,974

Operating income		26,348		117,191
Interest and other income, net		1,862		1,731

Income before income tax expense		28,210		118,922
Income tax expense		8,463		35,677

Net income	$	19,747	$	83,245

Basic net income per share	$	0.12	$	0.55

Diluted net income per share	$	0.12	$	0.47

Shares used in basic per share computation		158,622		150,684
Shares used in diluted per share computation		167,925		182,565


	Three Months Ended July 29, 2001				Six Months Ended July 29, 2001
	As Restated		As Previously Reported		As Restated		As Previously Reported
	(In thousands, except per share data)
Revenue	$	259,875	$	260,259	$	500,807	$	501,191
Cost of revenue		157,636		156,571		304,348		305,866

Gross profit		102,239		103,688		196,459		195,325

Operating expenses:
Research and development	��	33,894		34,007		66,487		65,421
Sales, general and administrative		20,278		20,378		39,400		39,215
Amortization of goodwill		3,236		3,236		3,611		3,611
Acquisition related charges		457		764		10,030		10,337

Total operating expenses		57,865		58,385		119,528		118,584

Operating income		44,374		45,303		76,931		76,741
Interest and other income, net		2,663		2,663		8,178		8,178

Income before tax expense		47,037		47,966		85,109		84,919
Income tax expense		14,111		14,390		25,533		25,476

Net income	$	32,926	$	33,576	$	59,576	$	59,443

Basic net income per share	$	0.23	$	0.24	$	0.42	$	0.42
Diluted net income per share	$	0.19	$	0.20	$	0.35	$	0.35
Shares used in basic per share computation		141,876		141,876		140,259		140,259
Shares used in diluted per share computation		170,302		170,302		168,321		168,321

	July 29, 2001
	As Restated		As Previously Reported
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	681,078	$	681,078
Restricted cash		28,050		28,050
Accounts receivable, net		112,846		112,846
Inventory		91,187		89,610
Prepaid expenses and other current assets		11,539		12,235
Prepaid and deferred taxes		41,911		41,911

Total current assets		966,611		965,730
Property and equipment, net		94,863		94,863
Deposits and other assets		11,681		11,681
Prepaid and deferred taxes		36,015		36,015
Goodwill and intangible assets, net		80,969		80,969

	$	1,190,139	$	1,189,258

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	88,683	$	88,737
Accrued liabilities		64,685		65,278
Current portion of capital lease obligations		2,019		2,019
Interest payable on convertible debenture		4,117		4,117
Deferred revenue		197,864		197,864

Total current liabilities		357,368		358,015
Capital lease obligations, less current portion		3,672		3,672
Long-term convertible debenture		300,000		300,000
Stockholders’ equity:
Common stock		143		143
Additional paid-in capital		339,362		339,362
Retained earnings		189,594		188,066

Total stockholders’ equity		529,099		527,571

	$	1,190,139	$	1,189,258

	Three Months Ended
	July 28, 2002 As Reported		July 29, 2001 As Adjusted		July 29, 2001 As Restated
	(In thousands, except per share data)
Amortization of goodwill	$	—	$	—	$	3,236
Net income	$	5,254	$	35,191	$	32,926
Basic EPS	$	0.03	$	0.25	$	0.23
Diluted EPS	$	0.03	$	0.21	$	0.19

	Six Months Ended
	July 28, 2002 As Reported		July 29, 2001 As Adjusted		July 29, 2001 As Restated
	(In thousands, except per share data)
Amortization of goodwill	$	—	$	—	$	3,611
Net income	$	88,499	$	62,104	$	59,576
Basic EPS	$	0.58	$	0.44	$	0.42
Diluted EPS	$	0.51	$	0.37	$	0.35

	Years Ended
	January 27, 2002 As Reported		January 28, 2001 As Restated		January 30, 2000 As Restated
	(In thousands, except per share data)
Net income	$	176,924	$	98,469	$	40,959
Goodwill and workforce amortization, tax effected	$	7,021	$	—	$	—
Adjusted net income	$	183,945	$	98,469	$	40,959
Reported basic EPS	$	1.24	$	0.75	$	0.34
Reported diluted EPS	$	1.03	$	0.62	$	0.28
Adjusted basic EPS	$	1.29	$	0.75	$	0.34
Adjusted diluted EPS	$	1.08	$	0.62	$	0.28

	July 28, 2002		January 27, 2002
	(In thousands)
3dfx	$	50,326	$	50,326
Other		3,901		—

Total intangible assets	$	54,227	$	50,326

	July 28, 2002					January 27, 2002
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(In thousands)
Technology licenses	$	6,270	$	(3,134	)	$	6,116	$	(2,317	)
Patents		9,000		(2,365	)		9,000		(841	)
Acquired existing technology		12,442		(4,588	)		12,331		(3,287	)
Trademarks		11,310		(2,908	)		11,310		(1,759	)
Other		250		(42	)		250		(10	)

Total intangible assets	$	39,272	$	(13,037	)	$	39,007	$	(8,214	)

	Three Months Ended
	April 27, 2003	April 28, 2002
	(In thousands)
Stock options outstanding	16,919	1,963
Convertible debentures (common equivalent shares)	6,472	—

	23,391	1,963

Description	Balance at Beginning of Period		Additions		Deductions			Balance at End of Period
	(In thousands)
Three months ended April 27, 2003
Allowance for sales returns and allowances	$	13,228	$	5,324	$	(6,472	)	$	12,080

Three months ended April 28, 2002
Allowance for sales returns and allowances	$	15,586	$	8,840	$	(5,271	)	$	19,155

	3dfx	Straight-Line Amortization Period
	(In thousands)	(Years)
Property and equipment	$ 2,433	1-2
Patents and trademarks	11,310	5
Goodwill	60,418	—

Total	$74,161

	April 27, 2003							January 26, 2003
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Technology licenses	$	14,719	$	(4,673	)	$	10,046	$	7,028	$	(3,972	)	$	3,056
Patents		10,319		(5,319	)		5,000		10,319		(4,478	)		5,841
Acquired intellectual property		11,117		(5,817	)		5,300		11,117		(5,236	)		5,881
Trademarks		11,310		(4,605	)		6,705		11,310		(4,021	)		7,289
Other		250		(88	)		162		250		(73	)		177

Total intangible assets	$	47,715	$	(20,502	)	$	27,213	$	40,024	$	(17,780	)	$	22,244

	April 27, 2003		January 26, 2003
	(In thousands)
Inventories:
Raw materials	$	23,618	$	17,510
Work in-process		35,153		13,179
Finished goods		107,014		114,357

Total inventories	$	165,785	$	145,046

	As of July 28, 2002		As of January 27, 2002
Accounts Receivable:
Customer A	—		—
Customer B	12	%	14	%
Customer C	25	%	16	%
Customer D	11	%	9	%
Customer E	1	%	6	%

	As of April 27, 2003		As of January 26, 2003
Accounts Receivable:
Customer A	13	%	12	%
Customer B	—		—
Customer C	20	%	18	%
Customer D	12	%	17	%
Customer E	12	%	11	%

Operating expenses:
Research and development	13.4		13.0		10.9		13.3
Sales, general and administrative	8.4		7.8		7.3		7.9
Amortization of goodwill	—		1.2		—		0.7
Acquisition related charges	—		0.2		—		2.0

Total operating expenses	21.8		22.2		18.2		23.9

Operating income	1.4		17.1		12.1		15.3
Interest and other income, net	0.3		1.0		0.3		1.6

Income before income tax expense	1.7		18.1		12.4		16.9
Income tax expense	0.5		5.4		3.8		5.1

Net income	1.2	%	12.7	%	8.6	%	11.8	%

Nominee	For	Withheld
Harvey C. Jones	134,957,180	805,809
William J. Miller	134,082,932	1,680,057