Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_18-cv-00321/USCOURTS-cand-5_18-cv-00321-1/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

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Case No.: 5:18-cv-00321-EJD

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UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

DOYUN KIM, 

Plaintiff, 

v. 

ADVANCED MICRO DEVICES, INC., et 

al., 

Defendants. 

Case No. 5:18-cv-00321-EJD 

ORDER GRANTING MOTION TO 

DISMISS 

Re: Dkt. No. 38 

Plaintiffs bring this putative class action against Advanced Micro Devices, Inc. (“AMD”), 

its CEO Lisa T. Su, and its CFO Devinder Kumar (collectively with AMD “Defendants”) for 

allegedly making misleading statements or omissions relating to the Spectre computer 

vulnerabilities. Plaintiffs allege that Defendants violated Section 10(b) of the Exchange Act and 

of Rule 10b-5 and Su and Kumar individually violated Section 20(a) of the Exchange Act all to 

artificially inflate AMD’s stock prices. Plaintiffs seek to represent a class of individuals who 

purchased AMD’s stock at the allegedly inflated prices between June 29, 2017 and January 11, 

2018 (the “Class Period”). Presently before the Court is Defendants’ motion to dismiss. Pursuant 

to Civil Local Rule 7-1(b), the Court has taken the motion under submission without oral 

argument. Having considered the parties’ papers, the Court now grants the motion and provides 

Plaintiffs with leave to amend. 

I. Background 

AMD is a publicly traded manufacturer of processors that are integral to desktop and 

laptop computers, mobile devices, and server processors. Amended Class Action Complaint 

(“ACAC”) ¶¶ 2-3, 20-21. These processors are integrated circuits that form the central processing 

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units (“CPUs”) of computers. Id. ¶ 23. AMD competes with other processor manufacturers, like 

Intel and ARM Holdings. Id. ¶ 24. Over the course of 2017, AMD’s total revenue increased by 

25 percent—over $1.05 billion. Id. ¶ 26. This growth was driven in large part by the success of 

its Ryzen processors, which were launched in March of that year. Id. ¶¶ 27-30. 

Microprocessors, like other hardware or software, can be subject to “vulnerabilities.” See 

id. ¶ 35. A “vulnerability” is a weakness in a computer system that can be exploited by a bad 

actor to obtain access to the computer system. Id. A vulnerability exists from the time that 

weakness is introduced to or discovered in deployed computer systems until it is removed or 

patched. Id. This matter concerns two vulnerabilities known as Spectre Variant 1 and Spectre 

Variant 2 that were present on AMD’s processors. Id. ¶ 6. Another vulnerability known as 

Meltdown was discovered and became public at the same time as the Spectre vulnerabilities. Id. ¶ 

61. AMD’s processors were not susceptible to Meltdown. Id. In theory, a bad actor could exploit 

the Spectre vulnerabilities to gain access to areas of an affected computer’s memory. Id. ¶ 41. In 

particular, the bad actor could access the computer’s “kernel,” a central part of the operating 

system that connects software with the CPU and other hardware. Id. The kernel prevents 

programs or applications from reading or accessing data in other programs or applications. Id. 

The bad actor could exploit Spectre with an innocuous appearing program to gain access to the 

data and memory in other programs. Id. ¶43. In other words, the bad actor could gain access to 

personal or private information stored in the computer’s memory, such as credit card information, 

passwords, etc. Id. ¶ 43. The bad actor though would not be able to alter anything on the 

computer. Id. 

In 2014, Google established a fulltime security team known as Project Zero to search for 

potential vulnerabilities in publicly deployed computer systems. Id. ¶ 37. When Project Zero 

discovers a vulnerability, it will notify the companies responsible for the vulnerability before 

publicly disclosing it. Id. ¶¶ 38-39. This way, the affected companies can address and eliminate 

the vulnerability before public disclosure alerts bad actors. Id. ¶¶ 38-40. Project Zero has 

modified its public disclosure policy to ensure the vulnerability remains secret while the affected 

company works on patches and/or updates to fix the vulnerability. Id. ¶ 40. 

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On June 1, 2017, Project Zero informed AMD that it had discovered Spectre Variant 1 on 

its processors. Id. ¶¶ 41, 47. Project Zero did not state that it had observed Spectre Variant 2 on 

AMD’s processors. Id. ¶ 45. At the same time, Project Zero alerted other processor

manufacturers that were susceptible to Spectre and/or Meltdown. Id. 41. Keeping with Project 

Zero’s usual practice, it did not publicly disclose these vulnerabilities. Id. ¶ 47. AMD would later 

represent that after receiving Project Zero’s report, it “engaged across the [technology] ecosystem 

to address [Project Zero’s] findings.” Id. ¶ 58. 

On July 25, 2017, Defendants filed with the SEC a Form 8-K that incorporated the risk 

disclosure from the Form 10-Q that AMD had filed on May 8, 2017. Id. ¶¶ 51-52. The risk 

disclosure statement read, in relevant part: 

Data breaches and cyber-attacks could compromise our 

intellectual property or other sensitive information, be costly to 

remediate and cause significant damage to our business and 

reputation. 

In the ordinary course of our business, we maintain sensitive data 

on our networks, including our intellectual property and 

proprietary or confidential business information relating to our 

business and that of our customers and business partners. The 

secure maintenance of this information is critical to our business 

and reputation. We believe that companies have been increasingly 

subject to a wide variety of security incidents, cyber-attacks,

hacking and phishing attacks, and other attempts to gain 

unauthorized access. These threats can come from a variety of 

sources, all ranging in sophistication from an individual hacker to a 

state-sponsored attack. Cyber threats may be generic, or they may 

be custom-crafted against our information systems. Cyber-attacks 

have become increasingly more prevalent and much harder to 

detect and defend against. Our network and storage applications, as 

well as those of our customers, business partners, and third party 

providers, may be subject to unauthorized access by hackers or 

breached due to operator error, malfeasance or other system 

disruptions. It is often difficult to anticipate or immediately detect 

such incidents and the damage caused by such incidents. These 

data breaches and any unauthorized access, misuse or disclosure of 

our information or intellectual property could compromise our 

intellectual property and expose sensitive business information. Cyber-attacks on us or our customers, business partners or third 

party providers could also cause us to incur significant 

remediation costs, result in product development delays, disrupt 

key business operations and divert attention of management and 

key information technology resources. These incidents could also 

subject us to liability, expose us to significant expense and cause 

significant harm to our reputation and business. In addition, we 

could be subject to potential claims for damages resulting from 

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loss of data from alleged vulnerabilities in the security of our 

processors.

Id. ¶ 52 (emphasis in the ACAC). On August 3, 2017, Defendants filed AMD’s quarterly Form 

10-Q that contained a risk disclosure identical to the one in the May 2017 Form 10-K. Id. ¶ 54. 

On November 2, 2017, Defendants filed another Form 10-Q. Id. ¶ 56. The risk disclosure in this 

filing was identical to the previous risk disclosures, except for adding one phrase, which is not 

relevant to this motion, to the second sentence. Id. 

Project Zero publicly disclosed the existence of the Spectre and Meltdown vulnerabilities 

on January 3, 2018. Id. ¶ 41. That same day, a group of independent researchers published their 

own report on the vulnerabilities (the “Kocher Report”). Id. The Kocher Report stated that the 

researchers had observed Spectre Variant 2 on AMD’s processors, and that AMD’s Ryzen 

processors were susceptible to both Spectre Variants. Id. ¶ 46. These reports confirmed that 

processors made by AMD, Intel, and ARM Holdings were susceptible to Spectre and/or 

Meltdown. Id. ¶ 44. Meltdown did not impact AMD’s processors. Id. 

That day, AMD posted a message to its website that read: 

There has been recent press coverage regarding a potential security 

issue related to modern microprocessors and speculative execution. 

Information security is a priority at AMD, and our security 

architects follow the technology ecosystem closely for new threats. 

It is important to understand how the speculative execution 

vulnerability described in the research relates to AMD products, 

but please keep in mind the following: 

• The research described was performed in a controlled, dedicated 

lab environment by a highly knowledgeable team with detailed, 

non-public information about the processors targeted. 

• The described threat has not been seen in the public domain. 

When AMD learned that researchers had discovered a new CPU 

attack targeting the speculative execution functionality used by 

multiple chip companies’ products, we immediately engaged 

across the ecosystem to address the teams’ findings. 

The research team identified three variants within the speculative 

execution research. The below grid details the specific variants 

detailed in the research and the AMD response details. 

Id. ¶ 58. The posting further provided the following details for each vulnerability: 

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 For Spectre Variant 1: “Resolved by software / OS updates to be made available by system 

vendors and manufacturers. Negligible performance impact expected.” Id. 

 For Spectre Variant 2: “Differences in AMD architecture mean there is a near zero risk of 

exploitation of this variant. Vulnerability to Variant 2 has not been demonstrated on AMD 

processors to date.” Id. (emphasis in the ACAC). 

 For Meltdown: “Zero AMD vulnerability due to AMD architecture differences.” Id. 

Also on January 3, 2018, an AMD spokesperson told investors Variant 2 posed a “near zero risk” 

to AMD’s processors. Id. ¶ 59. That day, AMD’s stock price rose from its January 2, 2018 close 

of $10.98 to a January 3, 2018 close of $11.55. Id. ¶ 61. 

On January 8, 2018, Su appeared on the cable TV station CNBC for an interview, where 

she said, in part, the following: 

Su: [M]oving to the other security conversation around Spectre,

you know this one is actually a little broader. You know it does 

affect our processors as well as others. There are a couple variants 

in there. The first variant is one that we believe, as an industry, 

we’re doing a very good job in coming together. And so the 

operating system vendors are actually putting some mitigations in 

place. And that, we think, is a strong solution. 

CNBC Host: And that’s the one where people are concerned about 

how much you might have to throttle the processor in order to 

make it safe. There were some initial reports out that it might be as 

much as 30% from some applications, but Apple and others seem 

to be saying, hey don’t worry, it won’t be that much. 

Su: Yeah, and I think some of those numbers are around 

Meltdown. Some of them were around Spectre. But to be fair, I 

think it’s very application dependent and very processor 

dependent. And so I do believe that there are good mitigations in 

place. I do believe that there are some workloads that you might 

see larger performance variance. But on this particular Spectre one, 

we feel that the performance will be small. 

CNBC Host: And the second Spectre variant? 

Su: And the second Spectre variant is one that, again, due to some 

of our architectural differences, from and AMD side, we think it’s 

rare. I think, we think, it’s difficult to access, you know, out in real 

world applications. But, I got to tell you, John, I said security is job 

one for us. We’re being very vigilant. We are working with all of 

our partners. And we’re going to continue to, you know, watch this 

space as it goes forward. 

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Id. ¶ 62 (emphasis in the ACAC). That day, AMD’s stock rose from $12.01 at opening to $12.28 

at close. Id. ¶ 63. 

Plaintiffs assert that Defendants “reveal[ed] the truth” that AMD’s processors were 

susceptible to Variant 2 on January 11, 2018. Id. ¶ 65. Defendants issued a post-market press 

release with the title “An Update on AMD Processor Security.” Id. The press release represented: 

The public disclosure on January 3rd that multiple research teams 

had discovered security issues related to how modern 

microprocessors handle speculative execution has brought to the

forefront the constant vigilance needed to protect and secure data. 

These threats seek to circumvent the microprocessor architecture 

controls that preserve secure data. 

At AMD, security is our top priority and we are continually 

working to ensure the safety of our users as new risks arise. As a 

part of that vigilance, I wanted to update the community on our

actions to address the situation. 

 Google Project Zero (GPZ) Variant 1 (Bounds Check 

Bypass or Spectre) is applicable to AMD processors. 

 We believe this threat can be contained with an 

operating system (OS) patch and we have been 

working with OS providers to address this issue. 

 Microsoft is distributing patches for the majority of 

AMD systems now. We are working closely with 

them to correct an issue that paused the distribution of 

patches for some older AMD processors (AMD 

Opteron, Athlon and AMD Turion X2 Ultra families) 

earlier this week. We expect this issue to be corrected 

shortly and Microsoft should resume updates for these 

older processors by next week. For the latest details, 

please see Microsoft’s website. 

 Linux vendors are also rolling out patches across 

AMD products now. 

 GPZ Variant 2 (Branch Target Injection or Spectre) is 

applicable to AMD processors. 

 While we believe that AMD’s processor architectures 

make it difficult to exploit Variant 2, we continue to 

work closely with the industry on this threat. We 

have defined additional steps through a combination 

of processor microcode updates and OS patches that 

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we will make available to AMD customers and 

partners to further mitigate the threat. 

 AMD will make optional microcode updates available 

to our customers and partners for Ryzen and EPYC 

processors starting this week. We expect to make 

updates available for our previous generation products 

over the coming weeks. These software updates will 

be provided by system providers and OS vendors; 

please check with your supplier for the latest 

information on the available option for your 

configuration and requirements. 

 Linux vendors have begun to roll out OS patches for 

AMD systems, and we are working closely with 

Microsoft on the timing for distributing their patches. 

We are also engaging closely with the Linux 

community on development of “return trampoline” 

(Retpoline) software mitigations. 

Id. (emphasis in the ACAC). That day, Su gave an interview to Yahoo Finance, during which she 

said: “to clarify, for Meltdown, AMD is not susceptible . . . we don’t have a susceptibility to that 

variant. But with Spectre, AMD is susceptible,” and “[w]e will have some micro-code and some 

updates with our software partners to ensure that [Spectre] Variant 2 is taken care of. We want to 

make sure these patches are rolled out as smoothly as possible. We did have an issue with some of 

the older processors with Microsoft and their patch. We’re working on that in real-time, and we 

expect that to be cleared up very shortly.” Id. ¶ 66. That day, AMD’s stock fell 0.99 percent, 

from $12.24 to $12.02. Id. ¶ 68. 

Plaintiffs do not allege that Spectre was ever successfully exploited on any AMD 

processors—or on any other manufacturer’s processors—in publicly deployed computers. Nor do 

Plaintiffs allege that Defendants ever believed, or had reason to believe that a successful 

exploitation of Spectre was imminent or likely. 

II. Request for Judicial Notice

Defendants ask the Court to take judicial notice of 15 separate documents. Dkt. 39, Req. 

for Judicial Notice. Plaintiffs oppose the request. Dkt. 41, Opp’n to Req. for Judicial Notice; 

Opp’n at 14-15. Courts may take judicial notice of an adjudicative fact that is “not subject to 

reasonable dispute,” meaning that it is “generally known” or “can be accurately and readily 

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determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). 

The Ninth Circuit has recently cautioned that when district courts take judicial notice of a 

document, they must “consider—and identify—which fact or facts it is noticing from [the 

document]. Just because the document itself is susceptible to judicial notice does not mean that 

every assertion of fact within that document is judicially noticeable for its truth.” Khoja v. 

Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). 

The Court takes judicial notice of AMD’s historic stock prices during January 2018 

contained in Exhibit 2. Dkt. 39-3, Ex. 2 to the Decl. of Matthew W. Close (“Ex. 2”). Courts may 

take judicial notice of historical stock prices because they are “subject to accurate and ready 

determination by resort to sources whose accuracy cannot reasonably be questioned.” Brodsky v. 

Yahoo! Inc., 630 F. Supp. 2d 1104, 1111-12 (9th Cir. 2009); cf. Khoja, 899 F.3d at 1001. The 

facts of AMD’s stock prices in January 2018 do not contradict any factual allegations in the 

Amended Complaint, and Plaintiffs do not contest the authenticity or accuracy of Exhibit 2. See 

Khoja, 899 F.3d at 1001. 

Because the Court does not presently consider any of the other documents in Defendants’ 

request for judicial notice, the Court DENIES the remainder of request without prejudice. 

III. Legal Standard

A complaint must include “a short and plain statement of the claim showing that the 

pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “To survive a motion to dismiss, a complaint 

must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on 

its face; that is, plaintiff must plead factual content that allows the court to draw the reasonable 

inference that the defendant is liable.” Khoja, 899 F.3d at 1008 (internal quotations, citations, and 

alterations omitted). When “faced with a Rule 12(b)(6) motion to dismiss a [Section] 10(b) action, 

courts must . . . accept all factual allegations in the complaint as true.” Tellabs, Inc. v. Makor 

Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). But, courts “do not, however, accept as true 

allegations that are conclusory.” In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1051 (9th Cir. 

2014). “Factual allegations must be enough to raise a right to relief above the speculative level.” 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 

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In addition, Section 10(b) claims are subject to the heightened pleading standards of Rule 

9(b) and the Private Securities Litigation Reform Act of 1995 (“PSLRA”). Tellabs, 551 U.S. at 

313. Rule 9(b) requires the plaintiff “state with particularity the circumstances constituting fraud.” 

A plaintiff must, therefore, “set forth what is false or misleading about a statement, and why it is 

false.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). The “PSLRA 

imposes additional specific pleading requirements, including requiring plaintiffs to state with 

particularity both the facts constituting the alleged violation and the facts evidencing scienter.” In 

re Rigel Pharm., Inc. Sec. Litig., 697 F.3d 869, 876 (9th Cir. 2012). 

III. Section 10(b) of the Exchange Act and Rule 10b-5

Plaintiffs contend that Defendants violated Section 10(b) of the Exchange Act and Rule 

10b-5 by making several allegedly misleading statement or omissions related the Spectre 

vulnerabilities. The ACAC raises three categories of allegedly misleading statements or 

omissions: (1) risk disclosures in corporate filings during the class period, (2) marketing 

statements from the launch of the Ryzen processor, and (3) public statements made in January 

2018 concerning the disclosure of the Spectre and Meltdown vulnerabilities. But in their 

opposition, Plaintiffs abandon their claim to the extent it is based on the representations from the 

launch of the Ryzen processors. The Court therefore dismisses this claim as far as it relies on 

those representations. See Norfolk Cty. Ret. Sys. v. Solazyme, Inc., 2018 WL 3126393, at *10 

(N.D. Cal. June 26, 2018); Qureshi v. Countrywide Home Loans, Inc., 2010 WL 841669, at *7 n.2 

(N.D. Cal. Mar. 10, 2010). To plead a claim for violations of Section 10(b) of the Exchange Act 

and Rule 10b-5, a plaintiff must allege facts showing (1) a material misrepresentation or omission, 

(2) scienter, (3) a connection between the misrepresentation or omission and the purchase or sale 

of a security; (4) reliance; (5) economic loss; and (6) loss causation. NVIDIA, 768 F.3d at 1052. 

Defendants argue that that the ACAC fails to adequately plead the first two elements. 

A. Material Misrepresentation or Omission

To adequately plead a material misrepresentation, a plaintiff must specify “[1] each 

statement alleged to have been misleading, [2] the reason or reasons why the statement is 

misleading, and, [3] if an allegation regarding the statement or omission is made on information 

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and belief, the complaint shall state with particularity all facts on which that belief is formed.” 

Khoja, 899 F.3d at 1008 (quoting 15 U.S.C. § 78u-4(b)(1)). The allegedly misleading statements 

must “directly contradict what the defendant knew at that time.” Id. Statements that are not false, 

but that omit material information may be misleading if the defendant had a duty to disclose. Id. 

The “duty to disclose does not arise from the mere possession of nonpublic market information.” 

In re Verity, Inc. Sec. Litig., 2000 WL 1175580, at *4 (N.D. Cal. Aug. 11, 2000) (citing Chiarella 

v. United States, 445 U.S. 222, 235 (1980)). But, “[d]isclosure is required . . . only when 

necessary to make statements made, in light of the basic circumstances under which they were 

made, not misleading.” Flynn v. Sientra, Inc., 2016 WL 3360676, at *10 (C.D. Cal. June 9, 2016) 

(quoting Maxtrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44 (2011) (internal alteration and 

quotation omitted)). An omission is misleading where it “affirmatively create an impression of a 

state of affairs that differs in a material way from the one that actually exists.” Id. (quoting Brody 

v. Transitional Hosps. Corp., 280 F.3d 997, 1006 (9th Cir. 2002)). 

1. The Risk Disclosure Statements

Plaintiffs allege that three of AMD’s SEC filings are materially false or misleading 

because their risk disclosure statements omit any reference to Spectre. ACAC ¶¶ 51, 52, 54, 56. 

The risk disclosure statements read in part: 

Data breaches and cyber-attacks could compromise our intellectual 

property or other sensitive information, be costly to remediate and 

cause significant damage to our business and 

reputation. . . . Cyber-attacks on us or our customers, business 

partners or third party providers could also cause us to incur 

significant remediation costs, result in product development 

delays, disrupt key business operations and divert attention of

management and key information technology resources. These 

incidents could also subject us to liability, expose us to significant 

expense and cause significant harm to our reputation and business. 

In addition, we could be subject to potential claims for damages 

resulting from loss of data from alleged vulnerabilities in the

security of our processors. 

Id. 

Plaintiffs allege that this statement is false and misleading because Defendants knew at the 

time that AMD’s chips were susceptible to Spectre, “leaving the owners of [AMD’s] chips in 

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danger of having their personal and confidential information misappropriated.” Id. ¶¶ 53, 55, 57. 

They further allege that Defendants “knew that AMD would necessarily incur additional costs to 

develop and distribute patches to allow its users to guard against the Spectre vulnerability. Id. 

They argue that by raising the danger of cyber attacks and data breaches to their processors in the 

risk disclosure statements, Defendants took on a duty to fully disclose the risk posed by Spectre. 

Opp’n at 6-7. This omission presented reasonable investors with “the impression of a state of 

affairs . . . that differed materially from the one that actually existed,” they argue. Sec. & Exch. 

Comm’n v. Strategic Glob. Investments, Inc., 262 F. Supp. 3d 1007, 1018 (S.D. Cal. 2017). Risk 

disclosures may be actionable “as material omissions when the disclosures speak to 

entirely . . . as-yet-unrealized risks and contingencies” and fail to alert “the reader that some of 

these risks may already have come to fruition.” Berson v. Applied Signal Tech., Inc., 527 F.3d 

982, 986 (9th Cir. 2008). 

They analogize this case to Flynn, where a court in the Central District found that those 

plaintiffs had adequately pled that that the defendant’s risk disclosures were misleading. 2016 WL 

3360676, at *10–11. There, the defendant had allegedly warned that its “products may not be 

manufactured . . . in compliance with regulatory requirements, or its manufacturing facilities may 

not be able to maintain compliance with regulatory requirements.” Id. at 11. But, before the 

defendant filed the documents containing the disclosure, a German regulatory agency had 

suspended the defendant’s sole manufacturer’s authorization to sell its goods in the European 

Union due to compliance issues. Id. at 2-3. The defendant’s risk disclosure was deceptive 

because it knew that what it had warned was a mere possibility—its manufacturer’s failure to 

comply with regulatory requirements—had already come to pass. Id. at 10-12. 

But those facts are not analogous to the factual allegations before the Court. While 

Plaintiffs describe the risk disclosures as warning “that AMD’s processors could be susceptible to 

security vulnerabilities,” (opp’n at 7), this assertion is not accurate. Defendants’ risk disclosures 

address the risks posed by “[d]ata breaches and cyber-attacks” and by “potential claims for 

damages resulting from loss of data from alleged vulnerabilities in the security of our processors” 

not the existence of a vulnerability. ACAC ¶¶ 52, 54, 56. Plaintiffs do not allege that AMD has 

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suffered any data breaches or cyber-attacks because of Spectre or that AMD has been subject to 

claims for damages resulting from a successful exploitation of Spectre. Nor do Plaintiffs allege 

that when Defendants filed the risk disclosures they had any contemporaneous reasons to believe 

that cyber-attacks, data breaches, or litigation because of Spectre were remotely likely. Unlike 

Flynn, the potential risks disclosed in the SEC filings had not come to fruition when Defendants 

filed the challenged risk disclosures. 

The Third Circuit’s decision Williams v. Globus Medical, Inc. is instructive. 869 F.3d 235 

(3d Cir. 2017). There, the plaintiffs alleged that the defendant had made misleading omissions 

because it had already secretly decided to end its relationship with a distributors before filing a 

Form 10-K and a Form 10-Q that both warned, “if any of our independent distributors were to 

cease to do business with us, our sales could be adversely affected.” Id. at 242. The Third Circuit 

reasoned that “[t]he risk actually warned of is the risk of adverse effects on sales—not simply the 

loss of independent distributors generally. Accordingly, the risk at issue only materialized—

triggering Globus’s duty to disclose—if sales were adversely affected at the time the risk 

disclosures were made.” Id. Because those plaintiffs did not allege that the defendant’s sales had 

suffered as a result of the decision to end the relationship with the distributor, the Third Circuit 

found that the defendant had no duty to disclose its decision to terminate its relationship with the 

distributor, and the risk disclosure was not misleading. Id. at 243. Here, the danger warned of by 

Defendants were cyber-attacks, data breaches, and resulting litigation—not the discovery of 

vulnerabilities in AMD’s processors. The Court finds that Plaintiffs have not pled that AMD’s 

risk disclosure statements were false or misleading. 

2. The January Statements

Plaintiffs argue that the statements about Spectre that Defendants made in January 2018 

were misleading. The statements on January 3 and 8, 2018 were false and misleading, they 

contend, because AMD knew from the Kocher article that Variant 2 was present on AMD’s 

processors, but Defendants stated that that the risk of exploitation was “near zero” or “rare.” Id.

¶¶ 6, 60, 63. Thus, those statements are prohibited “half-truths.” United States v. Laurienti, 611 

F.3d 530, 539 (9th Cir. 2010). The falsity of the January 3 and 8, 2018 statements is further 

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shown, Plaintiffs contend, by the January 11th statement that AMD’s processors were susceptible 

to both variants of Spectre, and the accompanying drop in stock prices. 

However, the Court finds that Plaintiffs have not adequately pled that the January 3 and 8, 

2018 statements are false or misleading. Defendants represented that Variant 2 posed a “near 

zero” risk to AMD’s processors, and that due to AMD’s architecture, Variant 2 was “rare” and 

“difficult to access.” ACAC ¶¶ 58, 59, 62. Plaintiffs’ argument that these statements omitted that 

Variant 2 was present on their processors is simply not accurate. There is no conflict or omission 

between Defendants’ statements that Variant 2 was “rare” and “difficult to access,” and Plaintiffs’ 

allegation that the Kocher article informed Defendants that researchers had observed Variant 2 on 

AMD’s processors. See id. ¶¶ 60, 63. At most, Defendants represented on January 3, 2018 that 

“[v]ulnerability to Variant 2 has not been demonstrated on AMD processors to date,” but Plaintiffs 

do not allege facts showing that Defendants knew that the Kocher Report researchers had observed 

Variant 2 on AMD’s products when Defendants made that representation. Nor does AMD’s later 

provision of patches and updates to protect against Variant 2 conflict AMD’s assessment that 

Variant 2 posed a “near zero risk.” Plaintiffs and their cited media report both misinterpret a “near 

zero risk” for “zero risk.” See id. ¶¶ 60, 63, 67; Tom Warren, AMD is releasing Spectre firmware 

updates to fix CPU vulnerabilities, The Verge (Jan. 11, 2018), 

https://www.theverge.com/2018/1/11/16880922/amd-spectre-firmware-updates-ryzen-epyc. 

Plaintiffs do not allege that Variant 2 posed a greater than a “near-zero” risk to AMD’s processors, 

that Variant 2 was more than “rare” on AMD’s processors, or that Variant 2 is not “difficult to 

access.” 

To the extent the statements are misleading because they omit any reference to yet-to-beannounced patches or updates to protect against Variant 2, Plaintiffs’ allegations are conclusory. 

ACAC ¶¶ 60, 63, 67. Plaintiffs plead no facts showing that Defendants had contemporaneous 

knowledge that patches and updates would be required when they made the statements. “[A] 

plaintiff seeking to plead falsity under the PSLRA generally must identify ‘specific 

contemporaneous statements or conditions that demonstrate the intentional or the deliberately 

reckless false or misleading nature of the statements when made.’” Rieckborn v. Jefferies LLC, 81 

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F. Supp. 3d 902, 927 (N.D. Cal. 2015) (quoting Ronconi v. Larkin, 253 F.3d 423, 432 (9th Cir. 

2001)); see also Khoja, 899 F.3d at 1008. 

For much the same reasons, the Court finds that the January 11th statement is consistent 

with the other statements. The January 11th statement neither revealed new information nor 

contradicts the earlier statements. Plaintiffs argue that the earlier statements that AMD faced a 

“near zero risk of exploitation” is at odds with the statement that Variant 2 is “applicable to AMD 

processors,” but this theory, like their theory on the risk disclosure statements, conflates a 

successful exploitation with a mere vulnerability. The information disclosed by Defendants on 

January 3 and 8, 2018 was “entirely consistent with the more detailed explanation” Defendants 

disclosed on January 11, 2018. In re Yahoo! Inc. Sec. Litig., 611 F. App’x 387, 389 (9th Cir. 

2015). Plaintiffs’ allegation that on January 11, 2018, AMD’s stock price dropped $0.12, or 0.99 

percent does not support an inference that the market perceived AMD as changing it position on 

its susceptibility to Variant 2. One, the cases cited by Plaintiffs are off-point because they 

concerned drops of 31 percent and of about 26 percent. See No. 84 Employer-Teamster Joint 

Council Pension Tr. Fund v. Am. W. Holding Corp., 320 F.3d 920, 935 (9th Cir. 2003); In re 

Montage Technlogy Grp. Ltd. Sec. Litig., 2016 WL 1598666, at *7 (N.D. Cal. Apr. 21, 2016). 

And two, AMD’s stock dropped by several time more on January 9, 2019—by $0.46—before 

Defendants allegedly revealed the alleged discrepancy. Ex. 2. The Court finds that Plaintiffs have 

not adequately pled that the January statements are false or misleading. 

B. Scienter

Even if Plaintiffs had adequately pled that Defendants had made materially false or 

misleading statements or omissions, the Court would still find that they had not adequately pled 

scienter. “Scienter” refers to “a mental state embracing intent to deceive, manipulate, or defraud.” 

NVIDIA, 768 F.3d at 1053 (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976)). 

The Ninth Circuit has recognized that recklessness “may satisfy the element of scienter.” Id.

(quoting Hollinger v. Titan Capital Corp., 914 F.2d 1564, 1568–69 (9th Cir.1990)). But, it must 

be “deliberate recklessness.” Id. (quoting In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 

977 (9th Cir. 1999), as amended (Aug. 4, 1999)). “Deliberate recklessness means that the reckless 

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conduct reflects some degree of intentional or conscious misconduct.” Hatamian v. Advanced 

Micro Devices, Inc., 87 F. Supp. 3d 1149, 1161-62 (N.D. Cal. 2015) (citation omitted). 

The PSLRA sets stringent standards for adequately pleading scienter. A complaint must 

“state with particularity facts giving rise to a strong inference that the defendant acted with the 

required state of mind.” 15 U.S.C. § 78u-4(b)(2). In assessing whether a complaint fulfills this 

requirement, a court “must consider plausible, nonculpable explanations for the defendant’s 

conduct, as well as inferences favoring the plaintiff. The inference that the defendant acted with 

scienter need not be irrefutable . . . or even the most plausible of competing inferences.” Tellabs, 

551 U.S. at 323-24 (quotations omitted). The Supreme Court has held that courts should consider 

“whether all of the facts alleged, taken collectively, give rise to a strong inference of scienter, not 

whether any individual allegation, scrutinized in isolation, meets that standard.” Id. at 322-23. In 

the Ninth Circuit, courts apply this rule with a two-step process. First, courts should determine 

whether any allegation is, by itself, sufficient to support the strong inference of scienter. NVIDIA, 

768 F.3d at 1056. If not, then courts should consider the allegations holistically. Id. A complaint 

will survive a motion to dismiss “only if a reasonable person would deem the inference of scienter 

cogent and at least as compelling as any opposing inference one could draw from the facts 

alleged.” Tellabs, U.S. 551 at 324. 

Plaintiffs raise three separate grounds allegedly showing scienter. But, none supports a 

strong inference of scienter on its own. First, Plaintiffs contend that because Project Zero notified 

AMD on June 1, 2017 that AMD’s processors were susceptible to Variant 1, Defendants filed the 

risk disclosures and made the January 2018 statements with the knowledge that those 

representations were false or misleading. The Court finds that under these factual allegations, 

knowledge of AMD’s susceptibility to Variant 1 is, on its own, not enough to plead a strong 

inference of scienter. Plaintiffs allege no facts showing that Defendants acted with either an intent 

to deceive, or with deliberate and reckless disregard for this knowledge in withholding disclosure 

until January 2018. Rather, Plaintiffs affirmatively plead a more compelling inference: that 

Defendants, in line with Project Zero’s protocol, tried to prevent public disclosure of the 

vulnerabilities before updates and patches to fix the vulnerability were available. ACAC ¶¶ 38-40. 

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Second, Plaintiffs argue that they have sufficiently alleged facts to impute scienter to Su 

and Kumar under the core operations doctrine. Where, as here, “a complaint relies on allegations 

that management had an important role in the company but does not contain additional detailed 

allegations about the [management] defendants’ actual exposure to [the allegedly concealed] 

information, it will usually fall short of the PSLRA standard” for alleging scienter. S. Ferry LP, 

No. 2 v. Killinger, 542 F.3d 776, 784 (9th Cir. 2008). Without considering other allegations, two 

exceptions to this rule exist. First, allegations about management’s role in the company may 

“independently satisfy the PSLRA[’s scienter standard] where they are particular and suggest that 

defendants had actual access to the disputed information.” Id. at 786. Or, second, the role of 

management can show scienter where “the nature of the relevant fact is of such prominence that it 

would be ‘absurd’ to suggest that management was without knowledge of the matter.” Id. As to 

the first exception, the ACAC contains no allegations suggesting Su had access to or knowledge of 

Spectre prior to January 8, 2018, or that Kumar ever had any access to, or knowledge of Spectre. 

At most, Plaintiffs allege that Su and Kumar, pursuant to section 302 of the Sarbanes-Oxley Act, 

certified the SEC filings at issue. ACAC nn.19-21. But, “required certifications under Sarbanes–

Oxley section 302(a), however, add nothing substantial to the scienter calculus.” Zucco Partners, 

LLC v. Digimarc Corp., 552 F.3d 981, 1003–04 (9th Cir. 2009), as amended (Feb. 10, 2009). In 

re Cell Pathways, Inc. is off-point. There, “the scienter allegations [did] not rest on [the 

individual defendants’] mere status within the company. Rather, Plaintiffs’ allegations of the 

individual Defendants’ knowledge [were] substantially more extensive,” and included allegations 

about their access to undisclosed information, their responsibilities in company operations, their 

role in preparing the allegedly misleading statements, and their role in creating and running the 

drug trial at issue. 2000 WL 805221, at *7 (E.D. Pa. June 20, 2000). Plaintiffs make no similar 

allegations regarding Su or Kumar. 

As to the second exception, while the ACAC contains allegations concerning the 

importance of the Ryzen processors to AMD’s business and the theoretical harm of a successful 

exploitation of Spectre, it does not allege there was any reason for Defendants to believe such an 

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exploitation was at all likely. Thus, susceptibility of AMD’s processors to Spectre was not so 

“prominen[t]” that it would be “absurd” for Su and Kumar not know about it. Killinger, 542 F.3d 

at 786. The cases cited by Plaintiffs all involved much more developed allegations about the 

prominence of the relevant issue. In Berson, the stop-work orders had “allegedly halted tens of 

millions of dollars of the company’s work.” 527 F.3d at 988. In Mulligan v. Impax Laboratories, 

Inc., the allegations involved “substandard, non-compliant conditions pervading their company’s 

manufacturing and quality control divisions—the heart of [the] company.” 36 F. Supp. 3d 942, 

970 (N.D. Cal. 2014). The district court found that “given the importance of manufacturing and 

quality control to the success of Impax and the fact that both areas of operation had been flagged 

by the FDA,” the standard for scienter had been met. Id. And in Reese v. Malone, the Ninth 

Circuit found it “absurd” that management would not be aware of the compliance violations at 

issue “[i]n light of the magnitude of the violations, the immense public attention on BP in the 

wake of the spills, and the contemporaneous documents demonstrating management's awareness 

of the company's non-compliance with the Corrective Action Order. 747 F.3d 557, 579-80 (9th 

Cir. 2014), overruled by City of Dearborn v. Align Tech., Inc., 856 F.3d 605 (9th Cir. 2017). 

Finally, Plaintiffs argue that the eight days between AMD’s announcement that the there 

was a “near zero risk” of exploitation through Spectre Variant 2 and the disclosure that its 

processors were susceptible to Spectre Variant 2 supports an inference of scienter. They contend 

that the inference the Court should draw is that Defendants knew that AMD’s processors were 

susceptible on January 3, 2018, but withheld that information for eight days to strengthen their 

position against competitors, like Intel, that were more seriously affected by Spectre and/or 

Meltdown. They analogize the facts here to Fecht v. Price Co., 70 F.3d 1078, 1082 (9th Cir. 

1995), and Roberti v. OSI Systems, Inc., 2015 WL 1985562 (C.D. Cal. Feb. 27, 2015). But, Fecht

is a pre-PSLRA case, that follows a standard that “can no longer be said to constitute the sum of 

scienter pleading requirements.” Marksman Partners, L.P. v. Chantal Pharm. Corp., 927 F. Supp. 

1297, 1309 (C.D. Cal. 1996); Fecht, 70 F.3d at 1082 n.4 (“With respect to scienter, the plaintiffs 

need simply say that scienter existed to satisfy the requirements of Rule 9(b).” (quotation and 

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alteration omitted)). And in Roberti, the Court explicitly found that none of the allegations 

independently established scienter. 2015 WL 1985562, at *11. The Court finds that Plaintiffs’ 

proposed inference lacks support from the ACAC. To begin, Plaintiffs do not allege that 

Defendants knew AMD’s processors were susceptible to Variant 2 prior to January 3, 2018—the 

day the Kocher article was published. ACAC ¶¶ 41, 46, n.11. As they concede, the report Project 

Zero provided to AMD in June 2017 did not say that Variant 2 had been observed on AMD’s 

processors. Id. ¶ 45. Second, while the ACAC does allege that Spectre and Meltdown affected 

Intel (ACAC ¶¶ 41, 44), it does not allege that Intel was “more seriously affected” than AMD. 

Opp’n at 20. Nor does the ACAC allege how Intel’s stock—or any other competitor’s stock—

responded to the disclosure of Spectre and Meltdown making any such comparative inference 

impossible to draw from this complaint. Plaintiffs also do not allege facts illustrating why 

Defendants would have believed that an eight-day delay would benefit AMD more than 

immediately disclosing its alleged susceptibility to Variant 2. In short, Plaintiffs have failed to 

“state with particularity facts giving rise to a strong inference” of scienter based solely on the eight 

days in between the statements. 15 U.S.C. § 78u-4(b)(2). 

Having determined that none of Plaintiffs allegations independently support a sufficient 

inference of scienter, the Court now considers Plaintiffs allegations holistically. Zucco, 552 F.3d 

at 992. Plaintiffs contend that their allegations support an inference that after Defendants learned 

of their processors’ susceptibility to Spectre Variant 1 on June 1, 2017, they omitted any reference 

to the vulnerability in their SEC filings from the class period. Then, after Project Zero disclosed 

both Spectre Variants and Meltdown on January 3, 2018, Defendants concealed their processors’ 

susceptibility to Variant 2 in order to gain a benefit over Intel and their other competitors. 

Defendants argue that the correct inference to draw from the ACAC is that when AMD learned of 

Spectre, it followed Project Zero’s protocol by first working to research the vulnerability and then 

develop any necessary mitigations. Only then did AMD publicly discuss the vulnerability. Thus, 

Defendants argue, there is no strong inference of scienter. 

Based on the facts alleged in the ACAC, the Court finds Defendants’ proposed inference to 

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be substantially more compelling than the one advanced by Plaintiffs. As discussed above, 

Plaintiffs do not allege sufficient facts to support any inference that that the January statements 

were intended to provide AMD with a boost over its competitors. Moreover, as opposed to acting 

with reckless disregard for Project Zero’s June 1, 2017 report in issuing the challenged risk 

disclosures, the more compelling inference is that Defendants were acting in compliance with 

Project Zero’s protocol by first investigating the vulnerability and developing a fix before 

disclosing the vulnerability. This case is analogous to NVIDIA. There, the defendant company 

did not disclose flaws in its processors for about a year. 768 F.3d at 1050-51. When it finally did, 

its stock price fell 31 percent and it took a $150-200 million charge to cover costs arising from the 

defects. Id. The plaintiffs there alleged that NVIDIA had acted with scienter because it had 

delayed the disclosure until it had readied replacement chips. Id. at 1060. The Ninth Circuit 

disagreed. It found that “a more compelling inference is that NVIDIA did not disclose because it 

was investigating the extent of the problem, whether it was responsible for it, and if so, whether it 

would exhaust the reserve [of money to cover product defects].” Id. at 1065. Plaintiffs make no 

attempt to distinguish the case at hand from NVIDIA. 

Accordingly, the Court finds that the ACAC fails to plead scienter under the PSLRA’s 

heightened standards. 

IV. Section 20(a) of the Exchange Act 

In order to maintain claims under Section 20(a), a plaintiffs must “adequately plead a 

primary violation of section 10(b).” Zucco, 552 F.3d 990. If the plaintiff does not meet that 

pleading requirement, then the “Section 20(a) claims may be dismissed summarily.” Id. The 

therefore Court dismisses Plaintiffs claims under Section 20(a). 

V. Conclusion

For the reasons discussed above, the Court grants Defendants’ motion to dismiss. 

Plaintiffs may file an amended complaint within 21 days of this order. 

IT IS SO ORDERED. 

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Dated: May 23, 2019 

______________________________________ 

EDWARD J. DAVILA 

United States District Judge 

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