Court Opinion

ID: 9696863
Source: CourtListenerOpinion
Date Created: 2023-08-25 19:00:41.047601+00
Date Added: 2024-06-11T12:27:43.372498
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

E. OHMAN J:OR FONDER AB;            No. 21-15604
STICHTING PENSIOENFONDS
PGB, Lead Plaintiffs,              D.C. No. 4:18-cv-
                                     07669-HSG
          Plaintiffs-Appellants,

and                                   OPINION

IRON WORKERS LOCAL 580
JOINT FUNDS,

          Plaintiff,

 v.

NVIDIA CORPORATION; JENSEN
HUANG; COLETTE KRESS; JEFF
FISHER,

          Defendants-Appellees,

and

OAKLAND COUNTY
EMPLOYEES' RETIREMENT
SYSTEM; OAKLAND COUNTY
VOLUNTARY EMPLOYEES'
2           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

BENEFIT ASSOCIATION TRUST;
OAKLAND COUNTY
EMPLOYEES' RETIREMENT
SYSTEM TRUST,

                 Defendants.

       Appeal from the United States District Court
         for the Northern District of California
     Haywood S. Gilliam, Jr., District Judge, Presiding

             Argued and Submitted May 10, 2022
                  San Francisco, California

                     Filed August 25, 2023

    Before: J. Clifford Wallace, William A. Fletcher, and
             Gabriel P. Sanchez, Circuit Judges.

                Opinion by Judge W. Fletcher;
                  Dissent by Judge Sanchez

                          SUMMARY *

                        Securities Fraud

    The panel affirmed in part and reversed in part the
district court’s dismissal of a securities fraud action brought

*
 This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.            3

under §§ 10(b) and 20(a) of the Securities and Exchange Act
of 1934 and Rule 10b-5 against NVIDIA Corp. and three of
its officers.
    Plaintiffs alleged that NVIDIA, a producer of graphics
processing units, knowingly or recklessly made materially
misleading and false statements regarding the impact of
cryptocurrency sales on NVIDIA’s financial performance in
order to conceal the extent to which NVIDIA’s revenue
growth depended on the notoriously volatile demand for
cryptocurrency. Plaintiffs alleged that the three individual
defendants had actual knowledge that increases in demand
for NVIDIA’s Gaming-segment products were largely
driven by crypto-related sales, that their public statements
minimizing the impact of crypto-related sales on NVIDIA’s
revenues were materially false or misleading, and that the
statements were made knowingly or recklessly. The district
court dismissed plaintiffs’ amended complaint for failure to
sufficiently plead that defendants’ allegedly false or
misleading statements were made knowingly or recklessly.
    In order to prevail on their claims under § 10(b) and Rule
10b-5, plaintiffs were required to show both that defendants’
statements were materially false or misleading, and that their
statements were made knowingly or recklessly. The panel
held that the amended complaint sufficiently alleged that
defendants Jensen Huang and Colette Kress made materially
false or misleading statements, but the amended complaint
did not sufficiently so allege as to defendant Jeff Fisher. The
panel held that the amended complaint sufficiently alleged
that Huang, but not Kress, made the statements knowingly
or recklessly, in violation of § 10(b) and Rule 10b-5.
    Section 20(a) assigns joint and several liability for any
person who controls any person liable under
4          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

§ 10(b). Because the panel held that the amended complaint
did not sufficiently plead a cause of action under § 10(b) and
Rule 10b-5 against defendants Kress and Fisher, the only
alleged primary violation was that committed by NVIDIA
through defendant Huang. The panel affirmed the district
court’s dismissal of plaintiffs’ § 20(a) claims against Kress
and Fisher, vacated the dismissal of the § 20(a) claims as to
Huang, and remanded for further proceedings as to those
claims.
    Dissenting, Judge Sanchez wrote that, under the pleading
requirements of the Private Securities Litigation Reform Act
of 1995, plaintiffs failed sufficiently to allege either falsity
or scienter.

                         COUNSEL

Gregory P.N. Joseph (argued) and Rachel M. Cherington,
Joseph Hage Aaronson LLC, New York, New York; Eric
Gerard, Matthew L. Mustokoff, and Andrew L. Zivitz,
Kessler Topaz Meltzer & Check LLP, Radnor,
Pennsylvania; Jennifer L. Joost, Kessler Topaz Meltzer &
Check LLP, San Francisco, California; John Browne and
Michael Mathai, Bernstein Litowitz Berger & Grossman
LLP, New York, New York; Lauren M. Cruz and Jonathan
D. Uslaner, Bernstein Litowitz Berger & Grossman LLP,
Los Angeles, California; for Plaintiffs-Appellants.
Patrick E. Gibbs (argued), John Dwyer, Samantha Kirby,
Joshua Walden, and Claire A. McCormack, Cooley LLP,
Palo Alto, California; Kathleen R. Hartnett, Julie M. Veroff,
Cooley LLP, San Francisco, California; Sarah M. Lightdale
and Patrick Hayden, Cooley LLP, New York, New York; for
Defendants-Appellees.
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.            5

                         OPINION

W. FLETCHER, Circuit Judge:

    Lead Plaintiff E. Öhman J:or Fonder AB and others
(“Plaintiffs”) brought this putative class action on behalf of
all persons or entities who purchased or otherwise acquired
common stock of NVIDIA Corporation (“NVIDIA”) during
the proposed Class Period. Plaintiffs allege that during the
Class Period defendant NVIDIA and three of its officers
knowingly or recklessly made materially “misleading and
false statements regarding the impact of cryptocurrency
sales on NVIDIA’s financial performance” in order to
conceal the extent to which NVIDIA’s revenue growth
depended on the notoriously volatile demand for
cryptocurrency (“crypto”). Individual defendants are Jensen
Huang, NVIDIA’s co-founder, President, and Chief
Executive Officer; Colette Kress, NVIDIA’s Executive Vice
President and Chief Financial Officer; and Jeff Fisher,
NVIDIA’s Senior Vice President of the GeForce Business
Unit and Head of Gaming during the Class Period.
    Plaintiffs allege violations of Sections 10(b) and 20(a) of
the Securities and Exchange Act of 1934 (“Exchange Act”),
15 U.S.C. §§ 78j(b) and 78t(a), and of Securities and
Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5.
Plaintiffs allege that the individual defendants had actual
knowledge that increases in demand for NVIDIA’s Gaming-
segment products were largely driven by crypto-related
sales, that their public statements minimizing the impact of
crypto-related sales on NVIDIA’s revenues were materially
false or misleading, and that the statements were made
knowingly or recklessly.
6         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

    The district court dismissed Plaintiffs’ first complaint
with leave to amend, holding that it failed to plead
sufficiently that defendants’ statements were materially false
or misleading, and that the statements were made knowingly
or recklessly.      The complaint’s allegations that the
statements were materially false or misleading relied in part
on expert analysis provided by the Prysm Group (“Prysm”),
which had been employed by Plaintiffs to provide an
analysis of NVIDIA’s finances. The court found that
Plaintiffs’ complaint “fail[ed] to describe Prysm’s
assumptions and analysis with sufficient particularity to
establish a probability that its conclusions are reliable.”
Further, the court found that the complaint’s allegations of
scienter depended on confidential witness statements that
“fail[ed] to plausibly establish that any particular statement
by any Individual Defendant was knowingly or recklessly
false or misleading when made.”
    After Plaintiffs amended their complaint, the district
court dismissed the complaint under Rule 12(b)(6) without
leave to amend. Iron Workers Local 580 Joint Funds v.
NVIDIA Corp., 522 F. Supp. 3d 660, 679 (N.D. Cal. 2021).
The court dismissed on the sole ground that the amended
complaint failed to sufficiently plead that the defendants’
allegedly false or misleading statements were made
knowingly or recklessly. Id. The court found that
allegations in the complaint “again fail[ed] to raise a strong
inference of scienter, largely because Plaintiffs [did] not
adequately tie the specific contents of any . . . data sources
[about crypto-related demand] to particular statements so as
to plausibly show that the Defendant who made each
specified statement knowingly or recklessly spoke falsely.”
Id. at 674. The court did not reach the question whether the
amended complaint failed to sufficiently plead that the
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           7

statements were materially false or misleading. Id. at 679
n.6.
   We reverse in part and remand for further proceedings.
                       I. Background
    The following narrative is taken from Plaintiffs’
amended complaint. Throughout this opinion unless
otherwise noted, text inside quotation marks is taken directly
from the amended complaint.
    NVIDIA is one of the world’s largest producers of
graphics processing units (“GPUs”). A GPU is processing
hardware that, when incorporated into an electronic device,
allows that device to “perform[] computationally intensive
tasks more efficiently.” GPUs were developed primarily for
graphics rendering and are “used most frequently in video
gaming,” but GPUs can also perform other “non-graphics
tasks requiring repetitive computations.” One such non-
graphics task is crypto mining.
    Cryptocurrencies are digital “tokens” that are circulated
on networks using blockchain technology. At the heart of
the technology is the blockchain, a “decentralized,
immutable ledger” that relies on participants in the network
to cooperatively verify and record pending transactions.
Participants do so by using their computers’ processing
power to solve “a difficult mathematical puzzle through
laborious trial-and-error work,” and solutions are rewarded
with new issues of cryptocurrency. This puzzle-solving
process is called “mining.”
   In recent years, crypto networks have grown in size and
complexity, making crypto mining an increasingly
computational-intensive task. As a result, crypto miners use
powerful mining hardware, such as GPUs, to perform their
8         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

mining. Crypto miners’ demand for GPUs can substantially
boost the revenues of companies selling GPUs to miners.
“Because cryptocurrency prices have swung wildly over
their short history, the profitability of mining has followed
suit,” and the resulting demand for GPUs “has proven
extremely volatile.” When crypto prices drop substantially,
mining becomes unprofitable. When that happens, miners
stop purchasing GPUs and, in some cases, start reselling
GPUs on the secondary market.
    Before the beginning of the Class Period, analysts and
investors witnessed firsthand the impact of the “downside of
crypto-mania” on NVIDIA’s “chief rival,” Advanced Micro
Devices (“AMD”). In 2013 and 2014, AMD’s GPUs were
“the gold standard” in hardware for mining Bitcoin, one of
the most popular early cryptocurrencies. In the second half
of 2013, Bitcoin prices increased dramatically. As a result,
the demand for AMD’s GPUs “skyrocketed,” with its GPUs
selling for up to three times their usual price. Five months
after the peak demand for Bitcoin, “the price of Bitcoin
dropped more than 70% . . . [, and] so, too, did demand for
AMD’s GPUs—a problem compounded by miners dumping
used AMD GPUs on the secondary market at steep
discounts.” “AMD’s revenues suffered as its crypto-related
sales evaporated.”
    The proposed Class Period runs from May 10, 2017,
through November 14, 2018. The gravamen of Plaintiffs’
suit is that, during the Class Period, the individual
Defendants knowingly or recklessly misled investors about
NVIDIA’s exposure to the crypto volatility that AMD had
experienced just a few years before. The amended complaint
alleges that the individual Defendants knew that crypto
miners were purchasing very large numbers of NVIDIA’s
“GeForce” GPUs, designed for gaming, but that in their
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.          9

public statements the individual Defendants failed to reveal,
or materially understated, the amount of NVIDIA’s revenue
growth that was due to crypto-related purchases of GeForce
GPUs.
    NVIDIA generally does not sell its GPUs directly to end
users, but rather to device manufacturers, referred to as
“partners.” Partners purchase GPUs from NVIDIA and
distribute them to end users. NVIDIA sells to partners in
five markets, commonly referred to as “segments.” Two
segments are pertinent here: (1) Gaming; and (2) Original
Equipment Manufacturer and Intellectual Property
(“OEM”). The Gaming segment is NVIDIA’s most
important market. During the Class Period, revenues in the
Gaming segment “exceeded those of the four other segments
combined.” NVIDIA’s primary product in the Gaming
segment is its “GeForce GPU,” which is “designed to
improve video-game applications.” (Cleaned up.) GeForce
GPUs are designed for gaming, but like AMD’s GPUs they
can also be used for crypto mining. In particular, GeForce
GPUs can be used to mine “Ether,” one of the most
significant cryptocurrencies during the Class Period. The
OEM segment generally comprises “low-end GPUs sold into
devices such as tablets and phones, as well as intellectual-
property assets.” OEM has been an “ancillary catch-all
segment that contributed just 5% to 10% of [NVIDIA’s]
revenues.”
    NVIDIA carefully monitors purchases of GPUs from its
partners. Such purchases are known as “sellout.” “In 2015,
[Defendant] Huang told investors during an earnings call,
‘we monitor sellout in the channel literally every day.’”
    In 2016, “signs of a new bubble appeared.” The price of
Bitcoin more than quadrupled between September 2015 and
10        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

the end of 2016, and a number of other cryptocurrencies
came on line at about this time. The most important of the
new cryptocurrencies was Ether. “[I]n the spring of 2017,
Ether began a meteoric climb that temporarily peaked at over
$400 per token . . . . [I]n January 2018, Ether peaked at over
$1,400 per token—an increase of more than 13,000% in a
single year. Other cryptocurrencies mined with GPUs
witnessed similarly dramatic increases in value. These
skyrocketing valuations made mining enormously
profitable, and once again caused a massive surge in demand
for GPUs.”
    As cryptocurrency valuations skyrocketed, miners
purchased NVIDIA’s GeForce GPUs “in droves.”
NVIDIA’s Gaming-segment revenues, driven by sales to
crypto miners, increased dramatically as the price of Ether
and other cryptocurrencies skyrocketed. “[O]n May 9, 2017,
NVIDIA reported first quarter sales [from February 1 to
April 30, 2017] for its Gaming segment of $1.02 billion—
representing a 49% year-over-year increase and 52.8% of
total revenues. The Company reported similarly spectacular
numbers each quarter for the next year, including on May
10, 2018, when it announced that Gaming-segment revenues
were $1.723 billion—a 68% year-over-year increase, and
approximately 2.5 times the revenue for that segment two
years prior.”
   “[I]n May 2017, [at the beginning of the class period,]
NVIDIA launched a special GPU specifically designed for
cryptocurrency mining (the ‘Crypto SKU’).” Crypto SKUs
were designed for crypto mining rather than for gaming.
Revenues from sales of Crypto SKUs were reported as
OEM-segment rather than Gaming-segment revenues.
Despite the introduction of Crypto SKUs, crypto miners
continued to purchase enormous numbers of GeForce GPUs.
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.        11

All revenues from sales of GeForce GPUs were recorded by
NVIDIA as Gaming-segment revenues, even though a very
substantial portion of those revenues came from purchases
by crypto miners.
    On January 1, 2018, NVIDIA revised its GeForce End
User Licensing Agreement (“EULA”) to generally prohibit
end users from employing GeForce GPUs in corporate
datacenters.    Critically, however, the EULA left an
“important carve-out [that] . . . not only acknowledged, but
encouraged, the continued use of GeForce GPUs (not the
Crypto SKU) for large-scale cryptocurrency mining in
datacenters.” The carve-out read, “The software is not
licensed for datacenter deployment, except that blockchain
processing in a datacenter is permitted.”
    During the Class Period, analysts and investors
repeatedly asked the individual Defendants about the source
of NVIDIA’s dramatically increased company revenues. In
particular, they asked whether the increased revenues were
driven by sales to crypto miners. In the wake of AMD’s
crypto boom and bust, analysts and investors “were acutely
focused on how much of NVIDIA’s revenues were based on
cryptocurrency-mining.” “Analysts asked specific questions
about the subject during each of the Company’s earnings
calls during the Class Period and . . . at numerous
conferences and in several interviews.”
    When responding to questions from analysts and
investors, individual Defendants Huang and Kress
repeatedly denied that increases in NVIDIA’s Gaming-
segment revenue were driven by demand from crypto
miners. As recounted in detail below, Defendants Huang
and Kress insisted that NVIDIA’s exposure to crypto
volatility was limited to the relatively small fraction of
12        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

NVIDIA’s total revenues attributable to OEM-segment sales
of Crypto SKUs. As also recounted in detail below,
investors and analysts credited Huang’s and Kress’s
statements.
    Near the end of the Class Period, the profitability of
crypto mining declined. Purchases of GeForce GPUs
declined as a result. On August 16, 2018, NVIDIA lowered
revenue guidance by 2.2% for the upcoming quarter that
would run from August 1 to October 31, 2018. This
guidance projected revenue at a level “significantly lower
than the market had expected.” “Investors and the financial
press immediately connected the share price decline to
NVIDIA’s guidance revision and soft results from its
cryptocurrency sales.” However, Defendants did not
disclose the source and extent of the problem. Defendant
Huang “downplayed concerns.”           “Analysts credited
Defendants’ reassuring statements.”
     On November 15, 2018, the day after the end of the Class
Period, NVIDIA announced that it had missed revenue
projections by nearly 2% for the quarter that had just ended
and that “it was expecting [overall] revenues of only $2.7
billion” in the next quarter, “a 7% decline” from the quarter
a year earlier. In prepared remarks on November 15,
Defendant Kress stated: “Gaming was short of expectations
as post crypto channel inventory took longer than expected
to sell through.” In his remarks on November 15, Defendant
Huang referred to the excess channel inventory as a “crypto
hangover.”
    As recounted in detail below, investors and analysts were
surprised by NVIDIA’s November 15 disclosures.
NVIDIA’s stock price plummeted. It dropped 28.5% in two
           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.             13

trading days, from $202.39 per share on November 15 to
$144.70 per share on November 19.
    This suit followed.
                    II. Standard of Review
    “We take as true the complaint’s plausible and properly
pleaded allegations . . . .” In re Quality Sys., Inc. Sec. Litig.,
865 F.3d 1130, 1136 (9th Cir. 2017). Securities fraud cases,
such as this one, are subject to the heightened pleading
standard not only of Federal Rule of Civil Procedure 9(b) but
also of the Private Securities Litigation Reform Act of 1995
(“PSLRA”). Zucco Partners, LLC v. Digimarc Corp., 552
F.3d 981, 990–92 (9th Cir. 2009). Rule 9(b) provides, “In
alleging fraud . . . , a party must state with particularity the
circumstances constituting fraud . . . .” The PSLRA
provides, as to allegations of “[m]isleading statements and
omissions,” that a complaint “shall specify each statement
alleged to have been misleading [and] the reason or reasons
why the statement is misleading.” 15 U.S.C. § 78u–4(b)(1).
It provides, as to allegations of a “[r]equired state of mind,”
that a “complaint shall, with respect to each act or omission
alleged to violate this chapter, 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
determining whether the complaint has satisfied these
standards, we ‘consider the complaint in its entirety, as well
as . . . documents incorporated into the complaint by
reference, and matters of which a court may take judicial
notice.’” Quality Sys., 865 F.3d at 1140 (alteration in
original) (quoting Tellabs, Inc. v. Makor Issues & Rts., Ltd.,
551 U.S. 308, 322–23 (2007)).
14         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

                        III. Discussion
   In order to prevail, Plaintiffs must show both that
Defendants’ statements were materially false or misleading,
and that their statements were made knowingly or recklessly.
In dismissing Plaintiffs’ amended complaint under Rule
12(b)(6), the district court reached only the question whether
Defendants’ statements were made knowingly or recklessly.
    We may reach the question whether Defendants’
statements were materially false or misleading despite the
district court’s failure to reach it. Because the district court
dismissed the amended complaint under Rule 12(b)(6), there
is no need for record development. Nw. Env’t Def. Ctr. v.
Brown, 640 F.3d 1063, 1080–81 (9th Cir. 2011), rev’d on
other grounds sub nom, Decker v. Nw. Env’t Def. Ctr., 568
U.S. 597 (2013). For purposes of Rule 12(b)(6), we need
only read the complaint and any associated documents and,
where appropriate, take judicial notice. Both parties have
briefed the question whether Defendants’ statements were
materially false or misleading. See, e.g., Dole Food Co. v.
Watts, 303 F.3d 1104, 1117–18 (9th Cir. 2002) (reversing
the district court after deciding a question not reached by the
district court: “The district court did not reach this issue, but
both parties agreed at oral argument that it is properly before
us for decision. Because the record is sufficiently developed
and the issue has been presented and argued to us, we agree
that it is appropriate for us to decide the question.”); see also
Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements,
Ltd., 328 F.3d 1122, 1136 (9th Cir. 2003). We therefore
reach the question whether Defendants’ statements were
materially false or misleading, as well as the question
whether Defendants’ statements were made knowingly or
recklessly.
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.          15

    We first address Plaintiffs’ claim under Section 10(b) of
the Exchange Act and SEC Rule 10b-5. We hold that the
amended complaint sufficiently alleges that Defendant
Huang made materially false or misleading statements and
that he made those statements knowingly or recklessly, in
violation of Section 10(b) and of Rule 10b-5. We next
address Plaintiffs’ claim under Section 20(a) of the
Exchange Act.       We remand that claim for further
proceedings in the district court.
A. Section 10(b) of the Exchange Act and SEC Rule 10b-5
    Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b),
provides in relevant part: “It shall be unlawful for any
person, directly or indirectly . . . [t]o use or employ, in
connection with the purchase or sale of any security
registered on a national securities exchange . . . any
manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the
Commission may prescribe as necessary or appropriate in
the public interest or for the protection of investors.” 15
U.S.C. § 78j(b). SEC Rule 10b-5 provides in relevant part:
“It shall be unlawful for any person, directly or
indirectly . . . [t]o make any untrue statement of a material
fact or to omit to state a material fact necessary in order to
make the statements made, in the light of the circumstances
under which they were made, not misleading, or [t]o engage
in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon any person.” 17
C.F.R. § 240.10b-5. The amended complaint alleges that
Defendants made materially false or misleading statements,
and that they did so knowingly or recklessly.
16         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

        1. Materially False or Misleading Statements
     A materially false or misleading statement violates
Section 10(b) and Rule 10b-5. “Falsity is alleged when a
plaintiff points to defendant’s statements that directly
contradict what the defendant knew at the time.” Khoja v.
Orexigen Therapeutics, Inc., 899 F.3d 988, 1008 (9th Cir.
2018). “Even if a statement is not false, it may be misleading
if it omits material information.” Id. at 1008–09. “[A]
statement is misleading if it would give a reasonable investor
the ‘impression of a state of affairs that differs in a material
way from the one that actually exists.’” Retail Wholesale &
Dep’t Store Union Loc. 338 Ret. Fund v. Hewlett-Packard
Co., 845 F.3d 1268, 1275 (9th Cir. 2017) (alteration in
original) (quoting Berson v. Applied Signal Tech., Inc., 527
F.3d 982, 985 (9th Cir. 2008)).
    The amended complaint alleges that the individual
Defendants’ statements during the Class Period were
materially false or misleading because they failed to state or
substantially understated the extent to which NVIDIA’s
Gaming-segment revenues were based on sales of GeForce
units to crypto miners. We hold that the statements made by
individual Defendants Huang and Kress were materially
false or misleading. However, we do not so hold as to a
statement made by Defendant Fisher.
      a. A Very Substantial Part of NVIDIA’s Revenues
     Came from Sales of GeForce GPUs to Crypto Miners
    The amended complaint sufficiently alleges that a
substantial part of NVIDIA’s crypto-related revenue during
the proposed Class Period came from sales of GeForce
GPUs that were reported in NVIDIA’s Gaming segment.
We remind the reader that the proposed Class Period runs
from May 10, 2017, to November 14, 2018.
           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           17

    The amended complaint alleges that in January 2019,
after the precipitous fall of NVIDIA’s stock price in the
wake of revelations during its November 15, 2018, earnings
call, RBC Capital Markets (“RBC”) published an
investigative report. RBC, a subsidiary of the Royal Bank
of Canada, is an international investment bank with offices
throughout the world. RBC has no connection to Plaintiffs.
RBC’s report assessed “the true effect of cryptocurrency-
related sales . . . on NVIDIA’s revenue [during an eighteen-
month period] from February 2017 to July 2018.” “The
report concluded that NVIDIA had ‘generated $1.95B in
total revenue related to crypto/blockchain.’ The report
pointedly noted that ‘[t]his compares to [the] company’s
statement that it generated [about] $602M over the same
time period’ in the OEM segment. In other words, RBC’s
analysis indicated that NVIDIA had understated its
cryptocurrency-related revenue by $1.35 billion over an 18-
month period that overlapped with the Class Period.” (First
and second alterations in original.)
    The amended complaint further alleges that Plaintiffs
employed the Prysm Group (“Prysm”), “an economic
consulting firm . . . that specializes in distributed ledger and
blockchain technology,” to investigate the question already
investigated by RBC. Prysm’s conclusion is almost identical
to RBC’s conclusion. Prysm calculated that, for the fifteen
months comprising five fiscal-year quarters between May 1,
2017, and July 31, 2018, “Defendants understated
NVIDIA’s crypto-related GPU sales by $1.126 billion.”
    The amended complaint includes a table summarizing
Prysm’s conclusions. The table compares NVIDIA’s total
cryptocurrency-related revenues to its Crypto SKU revenues
for five of the fiscal-year quarters in the Class Period:
18          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

     During the five fiscal-year quarters running from May 1,
2017, through July 31, 2018, 1 NVIDIA reported revenues
from sales of GeForce GPUs in its Gaming segment rather
than in its OEM segment. According to the table, during that
fifteen-month period, reported crypto-related revenues in the
OEM segment totaled $602 million, while overall crypto-
related revenues totaled $1.728 billion. Thus, crypto-related
revenues in the Gaming segment were $1.126 billion.
    In the discussion that follows, we rely on the estimated
numbers Prysm provided in the table reproduced above. We
recognize that, although the revenues listed on the table are
expressed in precise numbers, they are estimates. Therefore,
when relying on those estimates, we often use the word

1
   NVIDIA’s fiscal-year quarters are dramatically different from the
calendar-year quarters they represent. NVIDIA’s fiscal year 2018 began
on February 1, 2017. Thus, the second quarter of fiscal year 2018
(“2Q18”) ran from May 1 through July 31, 2017. The second quarter of
fiscal year 2019 (“2Q19”) ran from May 1 through July 31, 2018.
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.         19

“about” to remind the reader that the numbers in the Prysm
table are estimates.
    Defendants object that the Prysm analysis is not
sufficiently reliable, even when combined with other
allegations in the complaint, to support an allegation that
Defendants’ statements are false or misleading. We
disagree.
    First, the Prysm analysis was prepared by
knowledgeable and competent professionals. Prysm is “an
economic consulting firm based in New York and Los
Angeles that specializes in distributed ledger and blockchain
technology.” Prysm is led by Drs. Cathy Barrera and
Stephanie Hurder, both of whom have PhDs in business
economics from Harvard University. Drs. Barrera and
Hurder have held academic, consulting, and business
positions in which they have specialized in the economics of
blockchain.
    Second, Prysm provided a detailed analysis to support its
conclusions. See 15 U.S.C. § 78u-4(b)(1)(B). The
complaint provided detailed information about Prysm’s
methodology as well as a particularized recitation of facts
upon which Prysm relied. Prysm first calculated the
additional computing power used on major GPU-mined
blockchain networks during the Class Period. It focused on
the “three most popular GPU-mined cryptocurrencies during
the Class Period.” The additional computing power was
calculated using the change in the network’s hashrate from
one quarter to the next. Hashrate is the measure of the
number of calculations performed per second on a given
blockchain network. The hashrate data was obtained from
“two of the most widely used sources of network hashrate
data.” The maximum hashrate of one quarter was compared
20        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

to the maximum hashrate of the next quarter. This produced
a conservative estimate of the increased hashrate because, by
using the maximum hashrate from the last quarter, Prysm
assumed that every single GPU that mined on the blockchain
network last quarter at its peak was used during the
subsequent quarter.
    Prysm calculated the total number of GPUs needed to
account for the additional computing power. Prysm used the
hashing power of the GeForce GTX 1060 to represent a
standard GPU’s hashing power, as it was NVIDIA’s
cheapest and most economical model (and thus provided the
most conservative revenue estimate). Based on the GeForce
GTX 1060’s hashing power, Prysm estimated that a
minimum of approximately 16.9 million GPU units would
be required to make up for the difference in computing
power during the Class Period.
    Prysm determined that NVIDIA’s cryptocurrency
market share was approximately 69%. It used three sources
to make this determination. First, in 2018, Jon Peddie
Research, a “prominent” computer industry research firm
that is relied upon “by major investment firms throughout
the financial industry to analyze market dynamics”—a
research firm relied upon by Defendants themselves—
published a study analyzing cryptocurrency mining market
shares. The study estimated that NVIDIA’s market share
was approximately 69.4% in third-quarter fiscal year 2017
(August 1 through October 31, 2016) and 68.6% in fourth-
quarter fiscal year 2017 (November 1, 2016, through January
31, 2017). Second, RBC estimated NVIDIA’s market share
during the entire class period to be 75%, substantially higher
than the Jon Peddie Research estimate. Finally, Prysm relied
on an internal NVIDIA study of market share in China. The
study estimated that NVIDIA’s cryptocurrency mining
           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           21

market share in China was over 70% during five months
beginning one month before the start of the Class Period,
from April 1 through July 31, 2017. Prysm chose the most
conservative of the three estimates. Using the conservative
estimate of Jon Peddie Research, Prysm estimated that
NVIDIA had a 69% share of the cryptocurrency-related
GPU market during the Class Period. Prysm used that
market share to calculate the number of NVIDIA GPU units
used to produce the additional computing power on the
blockchain networks.
     To calculate the revenue earned by NVIDIA from the
sale of its GPU units used for crypto mining, Prysm used the
manufacturer’s suggested retail price (“MSRP”) for
GeForce GTX 1060, NVIDIA’s cheapest model. Prysm
deducted 33% from this MSRP to account for retail
markup—well above the industry norm of under 10%. It
multiplied this number by the estimated number of NVIDIA
GeForce GPU units sold during a fifteen-month (five
quarter) period during the Class Period, from May 1, 2017
to July 31, 2018, resulting in an estimated $1.728 billion in
cryptocurrency-related revenues for NVIDIA during that
fifteen-month period. NVIDIA reported only $602 million
in Crypto SKU revenue during that period. According to
Prysm’s calculations, NVIDIA thus earned a conservative
estimate of $1.126 billion in crypto-related revenue during
that period that was not reflected in its Crypto SKU sales
reported in the OEM segment.
    Third, Prysm’s results are strikingly similar to the results
obtained by RBC in its independent investigation. RBC
estimated that over an eighteen-month (six quarter) period
beginning one quarter before the start of the Class Period,
from February 2017 to July 2018, NVIDIA understated its
crypto-related revenues by $1.35 billion. Prysm estimated
22        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

that over a fifteen-month period from May 1, 2017, to July
31, 2018, NVIDIA understated its crypto-related revenues
by $1.126 billion. If RBC’s 18-month period had been
reduced to a fifteen-month period, and if its estimate of
understated cryptocurrency-related revenue had been
reduced proportionately, its estimate for those fifteen months
would have been an understatement of NVIDIA’s crypto-
related revenues by $1.125 billion.
    Fourth, several former employees (“FEs”) of NVIDIA
confirmed, consistent with Prysm’s analysis, that crypto
miners purchased enormous quantities of GeForce GPUs,
and that revenues from purchases of GeForce GPUs were
counted as Gaming-segment rather than OEM-segment
revenues. FE 1 was employed for over ten years as a Senior
Account Manager in China. He left NVIDIA in December
2017, well into the class period. “FE 1 recounted that,
beginning in 2016 and continuing through 2017, mining
enterprises placed huge orders for GeForce GPUs from
NVIDIA’s partners, often in quantities of 50,000 or 100,000
units per order. Such bulk purchases are not made by
gamers, who buy only single GeForce GPUs at a time for
gaming.” FE 2 was a Senior Products Director in Santa
Clara, California, who worked at NVIDIA “from several
years before the Class Period began to May 2017.” FE 2
“stated that GeForce Gaming GPUs were the clear favorite
among crypto-miners.” FE 2 reported that “about two times
per month, miner groups would come directly to NVIDIA’s
headquarters [in Santa Clara] looking to purchase cheap
Gaming graphics cards in bulk amounts for crypto-
mining. . . . NVIDIA then referred the miners to a third-
party distributor.” FE 4 “worked as a Community Manager
in Moscow, Russia, from 2015 through August 2018.” “FE
4 observed a huge percentage of Gaming GPUs being sold
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.          23

to cryptocurrency miners, and not gamers, in late 2017. For
example, one Moscow retailer sold 2,000 NVIDIA GPU
units to a single customer during this period, all for
cryptocurrency mining. FE 4 estimated that, by the first half
of 2018, 50% of all NVIDIA Gaming GPUs being sold in
Russia were to miners.”
    Fifth, the essential correctness of Prysm’s analysis is
confirmed by events in the market. When crypto mining
became too expensive, crypto miners quit purchasing
GeForce GPUs. Some miners even sold their GeForce
GPUs. When the crypto mining market for GeForce GPUs
collapsed, NVIDIA was forced to reduce its overall year-
over-year revenue estimate by 7%.
    In sum, we hold that the combination of the following is
sufficient to show, even under the demanding pleading
standard of the PSLRA, there is a sufficient likelihood that a
very substantial part of NVIDIA’s revenues during the Class
Period came from sales of GeForce GPUs for crypto mining:
(1) the very similar analyses of RBC and Prysm; (2) the
statements of FE 1, FE 2, and FE 4; and (3) the fact that
NVIDIA’s earnings collapsed when cryptocurrency prices
collapsed and crypto miners quit purchasing NVIDIA’s
GeForce GPUs.
  b. Statements by Defendants Huang, Kress and Fisher
    The amended complaint sufficiently alleges that
Defendants Huang and Kress made materially false or
misleading statements when they told analysts and investors
that all or almost all of NVIDIA’s crypto-related revenues
were reported in its OEM segment rather than in its Gaming
segment.
24        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

             i. Statements by Defendant Huang
    On August 10, 2017, Huang and Kress hosted an
earnings call for NVIDIA’s second-quarter fiscal year 2018
(May 1 through July 31, 2017). A Goldman Sachs analyst
asked about the effect of cryptocurrency on NVIDIA’s
increased earnings. “Huang responded that the Company’s
Crypto SKU accounted for just $150 million of second-
quarter revenues, and that ‘we serve the vast . . . majority of
the cryptocurrency demand out of that specialized product.’”
(Alteration in original.) Huang failed to say that during that
same quarter NVIDIA had received a total of about $349
million in crypto-related revenues, of which about $199
million was due to sales of GeForce GPUs. That additional
$199 million in crypto-related revenues, not mentioned by
Huang, had been reported as Gaming revenues.
    On August 12, 2017, the website VentureBeat published
a transcript of an interview with Huang shortly after the
August 10 earnings call. The interviewer asked, “Did you
say a hallelujah for cryptocurrency?” Huang answered that
cryptocurrency mining “represented . . . maybe $150 million
or so” and that “our core business is elsewhere.” As noted
above, NVIDIA’s OEM segment had reported crypto-related
revenues of $150 million during the quarter in question.
Huang again failed to say that during that quarter NVIDIA
had received about $349 million in total crypto-related
revenues, of which about $199 million came from sales of
GeForce GPUs that had been reported as Gaming revenues.
    On August 23, 2017, NVIDIA filed a Form 10-Q with
the SEC, reporting its second-quarter fiscal year 2018
results. Defendants Huang and Kress both signed the form.
On the form, NVIDIA “announced a 59% increase of $701
million in GPU business revenue year-over-year, . . .
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.          25

represent[ing] that the increase ‘was due primarily to
increased revenue from sales of GeForce GPU products for
gaming.’” (Emphasis in original.) NVIDIA failed to say on
the form that about half of its Gaming-segment revenues
during the quarter came from sales of GeForce GPUs to
crypto miners rather than to gamers.
    On November 9, 2017, Defendants Huang and Kress
hosted an earnings call for NVIDIA’s third-quarter fiscal
year 2018 (August 1 through October 31, 2017). On
November 10, VentureBeat published the transcript of an
interview with Huang. “VentureBeat questioned whether
‘cryptocurrency is driving all of your success.’ Defendant
Huang responded by stating that, for NVIDIA,
cryptocurrency was ‘small but not zero . . . . It’s large for
somebody else. But it is small for us.’ Huang also stated
that cryptocurrency-related revenue was ‘[m]aybe $70
million’—the amount NVIDIA had attributed to the Crypto
SKU the day before.” (Alterations in original.) Huang failed
to say that during the quarter in question about $229 million
of NVIDIA’s Gaming-segment revenues came from sales of
its GeForce GPUs to crypto miners.
    On November 21, 2017, NVIDIA filed a Form 10-Q with
the SEC, reporting its third-quarter fiscal year 2018 results.
Huang and Kress both signed the form. On the form,
NVIDIA “stated that the 31% increase of $520 million in
GPU business revenue year-over-year ‘was due primarily to
increased revenue from sales of GeForce GPU products for
gaming.’” (Emphasis in original.) “It was materially false
and misleading . . . to [so] state . . . when $648 million of
NVIDIA’s GPU revenues in the second quarter and third
quarter of fiscal 2018—representing well over 100% of the
Company’s entire $520 million year-over-year increase in
GPU revenues—was due to sales of GPUs for
26        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

cryptocurrency mining, not gaming.”           (Emphasis in
original.)
    On February 9, 2018, Barron’s published an article
describing an interview with Defendant Huang following
NVIDIA’s February 8 earnings call for the fourth-quarter of
fiscal year 2018 (November 1, 2017, to January 31, 2018).
The reporter “explained that ‘[w]hen I asked Huang if he
wanted to point out anything in particular about the report
and outlook, Huang began, “Clearly there’s been a lot of talk
about crypto.”’ Huang then stated that cryptocurrency
represented a ‘small, overall’ ‘part of our business this past
quarter.’”      (Alteration in original.)        “[I]n fact,
cryptocurrency-related revenues in fourth quarter fiscal
2018 comprised $541 million—nearly 20% of NVIDIA’s
entire fourth quarter fiscal 2018 revenues across all business
segments.”
    On March 26, 2018, an industry publication,
TechCrunch, published an interview with Defendant Huang.
Huang stated in the interview “that ‘he still attribute[d]
crypto’s demands as a small percentage of Nvidia’s overall
business.’” “[I]n fact, cryptocurrency-related revenues in
fourth-quarter fiscal 2018 totaled $541 million—i.e., nearly
20% of NVIDIA’s entire fourth-quarter fiscal 2018
revenues.”     Of that $541 million in fourth quarter
cryptocurrency-related revenues, $466 million was for sales
of GeForce GPUs falsely attributed to gaming.
    On March 29, 2018, Defendant Huang appeared on Jim
Cramer’s CNBC show Mad Money. Cramer asked Huang
about a report stating that “cryptocurrency risks are
growing” and about another report stating that “we must be
concerned about the stock of NVIDIA.” Huang responded
“that the ‘core growth drivers’ for the Company’s revenue
           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           27

results were other areas of the business—Gaming,
Professional Visualization, Datacenter, and Automotive—
and that ‘cryptocurrency just gave it that extra bit of juice.’”
When Cramer asked Defendant Huang to confirm that ‘if
people think [cryptocurrency] is that important, they’re
going to miss the bigger picture,’ Huang responded,
‘Absolutely,’    and     again     contrasted       NVIDIA’s
cryptocurrency-related business to the Company’s ‘core’
businesses including Gaming.”
             ii. Statements by Defendant Kress
    On August 23, 2017, NVIDIA filed the Form 10-Q with
the SEC described above. Defendant Kress signed the form,
along with Defendant Huang.
    On September 6, 2017, Defendant Kress “spoke on
behalf of NVIDIA at the Citi Global Technology
Conference.” A Citigroup analyst “asked Kress: ‘[W]hat
steps has NVIDIA taken to avoid cannibalization of core
gaming market from these cards?’ In response, Kress stated,
‘we covered most of cryptocurrency with our cryptocards
[Crypto SKUs] that we had developed.’” Kress failed to say
that in the fiscal quarter that had ended a week before,
revenues from Crypto SKUs had been about $150 million,
while revenues from GeForce GPUs sold to crypto miners
had been about $199 million. That is, Kress failed to say that
“in second quarter fiscal 2018, 57% of NVIDIA’s
cryptocurrency revenues (or $199 million) were realized
through the Gaming segment, not through the Crypto SKU.”
    On November 9, 2017, Defendants Huang and Kress
hosted the earnings call described above. A Citigroup
analyst “asked Huang and Kress to ‘quantify how much
crypto was in the October quarter [running from August 1
through October 31, 2017].’ . . . In response, Kress stated
28        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

that NVIDIA’s ‘specific crypto [cards] equated to about $70
million of revenue, which is [] comparable to the $150
million that we saw last quarter.’” Kress failed to say that in
the “October quarter” at issue, revenues from GeForce GPUs
sold to crypto miners had been about $229 million. She also
failed (again) to say that while crypto-related revenues in the
OEM segment had been $150 million during the previous
quarter, revenues from sales of GeForce GPUs to crypto
miners, recorded in the Gaming segment, during the
previous quarter had been about $199 million. Put another
way, Kress told the Citigroup analyst that crypto-related
revenues for the two quarters had been about $220 million,
attributable to sales of Crypto SKUs. She failed to say that
during that same two-quarter period, NVIDIA had received
about $428 million in revenues from sales of GeForce GPUs
to crypto miners, which had been reported as Gaming-
segment revenues.
   On November 21, 2017, NVIDIA filed the Form 10-Q
with the SEC described above. Defendant Kress signed the
form, along with Defendant Huang.
    On November 29, 2017, Defendant Kress represented
NVIDIA at the Credit Suisse Technology, Media and
Telecom Conference. When a Credit Suisse analyst “asked
about the impact of cryptocurrency-related demand on
NVIDIA’s gaming revenues, Kress stated that ‘there
probably is some residual amount or small amount’ but that
‘the majority does reside in terms of our overall crypto card
[Crypto SKU], which is the size of about $150 million in
Q2.’” Kress failed to say that during that quarter sales of
GeForce GPUs to crypto miners, reported in the Gaming
segment, far exceeded sales of Crypto SKUs. Far from a
“small amount,” “in fact, Gaming-segment revenues from
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.        29

sales to crypto-miners (and not gamers) were $199 million
for the quarter.”
            iii. Statement by Defendant Fisher
    On May 10, 2017, Defendants Huang, Kress and Fisher
“participated in NVIDIA’s Annual Investor Day.” “During
the presentation, Defendant Fisher identified the purported
‘fundamental’ drivers for Gaming revenues as ‘eSports,
competitive gaming, AAA gaming, [and] notebook
gaming.’” “[D]uring second-quarter fiscal 2018 [running
from May 1 through July 31, 2017], when Defendant Fisher
made this statement, $199 million or (17%) of NVIDIA’s
Gaming-segment revenues were actually derived from
cryptocurrency mining (not gaming).”
          c. Response of Investors and Analysts
    Based on statements by Defendants Huang and Kress,
investors and analysts believed during the Class Period that
NVIDIA was not vulnerable to the vicissitudes of crypto
mining. “For example, an August 10, 2017 report from
Oppenheimer [Holdings] noted that ‘[c]rypto mining was
[about] $150M in 2Q’—a figure that matched NVIDIA’s
reported Crypto SKU sales in the OEM segment that
quarter—and mentioned no additional crypto-related
revenues in Gaming.” “Likewise, in a report issued May 11,
2018, SunTrust Robinson Humphrey explained that ‘crypto
revenue showing up in the crypto SKU significantly
mitigates what we see as the biggest near-term risk in
[NVIDIA], which is that older gaming GPUs sold to crypto-
miners could flood the secondary market and sink gaming
revenue.”
    Analysts and investors were surprised when, during the
earnings call on November 15, 2018, NVIDIA disclosed the
30         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

degree to which its revenues during the Class Period had
depended on sales to crypto miners. During the question-
and-answer period of the call, an analyst from Sanford C.
Bernstein & Co. asked:

       [T]he last several quarters, you’ve been
       saying . . . that you guys felt like you had a
       really good handle on the channel, and yet it
       seems like maybe that wasn’t exactly the
       case. . . . Like what happened?

    On November 16, the day after the disclosure, “analysts
from BMO [Bank of Montreal] questioned Defendants’
credibility: ‘[t]he large shortfall in guidance due to a bloated
channel due to crypto-currency is in sharp contrast to the
comments around channel inventory from the company at
the last earnings call.’” “Analysts at Deutsche Bank reported
the same day, ‘Gaming does not appear to be as compelling
an example of growth as many previously believed’ . . . .”
“Deutsche Bank concluded, ‘we expect the inventory
adjustment to reset Gaming segment expectations to a
meaningfully lower level and call into question what the true
growth rate of Gaming was/is.’”
    Also on November 16, “Morgan Stanley . . . questioned
the veracity of Defendants’ prior assurances.” It wrote, “The
implications of [Defendants’] commentary is that a larger
portion of demand in late 2017/early 2018 was for crypto
than they had initially indicated, and that an end to the crypto
bubble caused a channel refill which overshot. . . . There is
also the question of where end demand actually has been, ex-
crypto.”
   On November 17, VentureBeat published an interview
with Defendant Huang. “The interviewer explained: ‘I . . .
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           31

thought [cryptocurrency] was never really more than a tenth
of your revenue. It does surprise me that it can come back
and have this bigger effect.’ . . . ‘How do we get to larger
numbers that actually affect the quarterly results, though?
Again, it seemed, in the past, that it was described as a small
part of revenue.’”
    Investors’ and analysts’ surprise was reflected in the
precipitous fall in NVIDIA’s stock price immediately after
the disclosure on November 15. As noted above, NVIDIA’s
stock price dropped 28.5% in two trading days, from
$202.39 per share on November 15 to $144.70 per share on
November 19.
    When RBC released its investigative report in January
2019, industry press published articles saying that analysts
and investors had been misled. Bitcoin Exchange Guide
headlined, “RBC Capital Markets Analyst Investigates
NVIDIA Earnings, Discovers Over $1 Billion More Than
Stated.” Yahoo! Finance headlined, “Analyst Finds Nvidia
Earned $1.35 Billion More in Total Crypto Revenue Than
Stated.” TechPost headlined, “Analyst says Nvidia lied
about its cryptocurrency earnings to avoid stock crash.”
       d. Materially False or Misleading Statements
    We conclude from the foregoing that the complaint
sufficiently alleged Defendants Huang and Kress made
materially false or misleading statements during the Class
Period, leading investors and analysts to believe that
NVIDIA’s crypto-related revenues were much smaller than
they actually were. Huang and Kress repeatedly stated that
NVIDIA’s crypto-related revenues were either entirely or
largely revenues from sales of Crypto SKUs, reported in the
OEM segment. They repeatedly failed to mention in their
statements during the Class Period that the great majority of
32         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

NVIDIA’s crypto-related revenues came from sales of
GeForce GPUs, reported in the Gaming segment.
    The response of investors and analysts after NVIDIA’s
disclosures on November 15 make clear that Huang’s and
Kress’s statements during the Class Period were materially
false and misleading. As recounted above, sophisticated
professional analysts were surprised by the November 15
disclosures. Immediately after the disclosures, investors
sold great quantities of NVIDIA stock, resulting in a sudden
and substantial fall in NVIDIA’s stock price.
    We conclude, however, that Defendant Fisher’s
statement on May 10, 1017, was not materially false or
misleading. Fisher’s statement could reasonably have been
understood as a general statement about the source of
NVIDIA’s Gaming-segment revenues. The statement was
made at the very beginning of the Class Period and was not
inaccurate as to the historical source of NVIDIA’s Gaming-
segment revenues.
            2. Knowing or Reckless Statements
    To sufficiently plead scienter under the PSLRA,
Plaintiffs 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)(A). “In this circuit,
the required state of mind is a mental state that not only
covers intent to deceive, manipulate, or defraud, but also
deliberate recklessness.” Quality Sys., 865 F.3d at 1144
(cleaned up). “To assess whether the complaint meets this
standard, we ‘must ask: When the allegations are accepted
as true and taken collectively, would a reasonable person
deem the inference of scienter at least as strong as any
opposing inference?’” Id. (quoting Tellabs, 551 U.S. at
326). Where, as here, Plaintiffs’ scienter allegations rely on
            E. OHMAN J:OR FONDER AB V. NVIDIA CORP.                   33

the statements of confidential witnesses, the complaint
“must pass two hurdles to satisfy the PSLRA pleading
requirements.” Zucco, 552 F.3d at 995. “First, the
confidential witnesses whose statements are introduced to
establish scienter must be described with sufficient
particularity to establish their reliability and personal
knowledge. Second, those statements which are reported by
confidential witnesses . . . must themselves be indicative of
scienter.” Id. (citations omitted).
    We hold that the amended complaint sufficiently alleges
that materially false or misleading statements made by
Defendant Huang were made knowingly or recklessly. We
do not so hold with respect to alleged materially false or
misleading statements made by Defendant Kress. In the
discussion that follows, we describe only the allegations in
the complaint relevant to Defendant Huang’s scienter.
        a. Alleged Statements by Former Employees
    The amended complaint alleges that two unnamed
Former Employees, FE 1 and FE 2, had direct knowledge of
the degree of Defendant Huang’s knowledge. 2 To evaluate

2
  Extensive statements by FE 5 concerning Defendant Huang’s scienter
are alleged in the amended complaint, in addition to the alleged
statements of FE 1 and FE 2. Before the district court ruled on
Defendant’s motion to dismiss under Rule 12(b)(6), Defendants moved
to strike allegations of statements by FE 5. Iron Workers, 522 F. Supp.
3d at 671–72. The motion was accompanied by a sworn declaration from
a person identifying himself as FE 5. Id. The declaration stated that the
declarant had not made a number of specific statements attributed to FE
5 in the complaint. Id. The district court quite properly, in ruling on a
motion to dismiss under Rule 12(b)(6), refused to grant the motion to
strike. Id. at 672. The court reserved consideration of the truth of the
statements in FE 5’s declaration for a possible later stage in the
proceedings. In the interest of judicial efficiency on remand, we note
34          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

whether the Former Employees were described with
sufficient particularity to establish their reliability and
personal knowledge, we examine “the level of detail
provided by the [Former Employees], the corroborative
nature of the other facts alleged . . . , the coherence and
plausibility of the allegations, the number of sources, the
reliability of the sources, and similar indicia.” Id. (quoting
In re Daou Sys., Inc., 411 F.3d 1006, 1015 (9th Cir. 2005),
abrogated on other grounds by Matrixx Initiatives, Inc. v.
Siracusano, 563 U.S. 27, 37–49 (2011)). In essence, we ask
whether the complaint describes the Former Employees
“with sufficient particularity to support the probability that a
person in the position occupied by the source would possess
the information alleged.” Daou, 411 F.3d at 1015 (quoting
Nursing Home Pension Fund, Local 144 v. Oracle Corp.,
380 F.3d 1226, 1233 (9th Cir. 2004)).
   FE 1, mentioned above, was employed by NVIDIA for
over ten years as a Senior Account Manager in China. “The
China market was NVIDIA’s largest by far, accounting for
more revenues than the Company’s four other regions
combined.” FE 1 left NVIDIA in December 2017, seven
months after the beginning of the Class Period.
    “FE 1 explained that NVIDIA kept meticulous track of
who was buying its GPUs—not simply directly from the
Company, but also from its partners and others down the
distribution chain as well.” “FE 1 explained that managers
from all regions collected this sales data and inputted it into
NVIDIA’s centralized global sales database . . . .” “FE 1
explained that the GeForce executive team in the United

that in holding that Plaintiffs have sufficiently alleged Defendant
Huang’s scienter, we do not rely on any of the alleged statements by FE
5.
           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           35

States . . . had ready access to the centralized sales database.
FE 1 stated that, in addition to the GeForce executive team,
Huang and Kress . . . in fact had actual access to this data.”
“FE 1 described the U.S. executive team as ‘obsessed’ with
this sales data, which explicitly identified and quantified
crypto-miners’ burgeoning demand for GeForce GPUs
throughout the Class Period.” “FE 1 recounted that, every
quarter, a group of NVIDIA Vice Presidents and other
managers met with Huang at ‘higher hierarchies’ meetings
to review the Company’s performance. FE 1 stated that
emails were circulated within his department in advance of
these quarterly meetings. FE 1 also discussed these meetings
with his manager (Senior Sales Director Howard Jiang) and
other colleagues.” “FE 1 stated that NVIDIA Vice
Presidents presented sales data reflecting GeForce sales to
miners at the quarterly meetings with Huang in 2017. FE 1
learned this fact directly from [Senior Director for China
David] Zhang or [Howard] Jiang.”
    FE 1 recounted that NVIDIA was aware of the
“exploding cryptocurrency-related demand for GeForce
GPUs through the GeForce Experience data.” “GeForce
Experience” was software bundled with GeForce GPUs that
allowed NVIDIA to track in real time the manner in which
GeForce GPUs were being used. “FE 1 emphasized that
NVIDIA’s top managers regularly analyzed the GeForce
Experience data and that they understood the market
change—specifically, the increased demand—brought on by
cryptocurrency mining. ‘We actually know this data,’ FE 1
said. Indeed, FE 1 recalled David Zhang, the U.S.-based
Senior Director for China, explicitly discussing how
GeForce Experience data allowed NVIDIA to track mining
usage. Of Defendants’ later claims that they could not
36        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

determine whether GeForce GPUs were being used for
mining, FE 1 scoffed, ‘NVIDIA sure lied to everyone.’”
    FE 2, also mentioned above, was a Senior Products
Director who worked at NVIDIA’s headquarters in Santa
Clara, California. FE 2 worked at NVIDIA from several
years before the Class Period until the beginning of the Class
Period in May 2017. “FE 2 personally met with Huang on a
monthly basis while at NVIDIA and maintained contact with
former senior colleagues after his departure.”
    FE 2 “confirmed that Huang personally reviewed
NVIDIA’s sales data through the centralized sales database.”
FE 2 recollected “that Huang was ‘the most intimately
involved CEO he had ever experienced’ and always knew
everything that was occurring in the Company,’ a sentiment
that FE 2 stated was widely shared. ‘Everybody talked about
it among the different business groups,’ FE 2 recalled.”
    FE 2 attended some of the quarterly meetings at
NVIDIA’s Santa Clara headquarters. “FE 2 stated that
Huang reviewed everybody’s sales data in detail at these
meetings, which FE 2 described as ‘proctology exams.’”
“FE 2 further stated that Huang closely reviewed the
GeForce data at these events because GeForce revenues
were larger than that of any other group. As FE 2 recalled,
‘Jensen [Huang] is a micromanager. He micromanages
everything—very little gets done without him being
involved.’”
    “FE 2 stated that Huang brought up miners’ preference
for GeForce GPUs during at least two different Quarterly
Business Reviews at NVIDIA’s Santa Clara headquarters in
2017, which FE 2 attended . . . . Specifically, Huang
acknowledged that NVIDIA could not get the
cryptocurrency miners to buy the professional and more
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.          37

expensive Quadro and Tesla cards because miners . . . were
only interested in raw cost and ‘cranking out algorithms at
the lowest cost.’ FE 2 also recalled that when Huang stated
that miners were buying GeForce GPUs instead of the
professional cards, the information came as no surprise to FE
2 or any of the other NVIDIA executives in the room.”
    Defendant Huang had a “Top 5” weekly email reporting
system, in which senior managers throughout the company
would report to Huang. “FE 2 was also on the Top 5
distribution list. FE 2 confirmed that Huang had initiated the
Top 5 reporting system in 2014 or 2015, that it required
senior managers to send their reports by email every Friday,
and that Huang personally reviewed the Top 5 emails sent
by these senior managers. FE 2 further stated that Huang
made a point of telling employees that he had ‘super user’
status on NVIDIA’s IT system and would use it to review all
the Top 5 emails.”
    FE 2 quit working at NVIDIA at the beginning of the
Class Period. However, FE 2’s statements about Defendant
Huang’s practices in the period immediately preceding the
Class Period—in particular, his micromanaging and
attention to detail—are relevant and probative, showing how
Huang would have behaved and what he would have known
during the immediately following Class Period. Critically,
FE 2’s statements were not only about Huang’s general
practices and knowledge. Instead, FE 2’s statements
specifically concerned what Huang knew about the issue at
the heart of this case—the large volume of sales of GeForce
GPUs to crypto miners.
        b. Alleged Statements by Defendant Huang
    Defendant Huang himself publicly stated that he
carefully monitored NVIDIA’s sales data. For example, as
38        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

mentioned above, in response to a question during
NVIDIA’s August 10, 2017, earnings call, “Huang told
investors that ‘our strategy is to stay very, very close to the
market. We understand its dynamics really well . . . . We
know its every single move . . . .” Repeatedly during
earnings calls and in interviews with analysts, Huang
showed himself to be familiar with specific revenue numbers
attributable to particular categories of sales.
                c. Knowingly or Recklessly
    We conclude from the foregoing that the amended
complaint has sufficiently pleaded that during the Class
Period Defendant Huang knowingly or recklessly made false
or misleading statements about the degree to which
NVIDIA’s revenues were dependent on sales of GeForce
GPUs to crypto miners. FE 1 and FE 2 portray Huang as a
highly competent, extremely detail-oriented manager who
would have known that a significant source of NVIDIA’s
revenues during five quarters comprising most of the Class
Period—about $1.126 billion—was from GeForce GPU
sales to crypto miners. Indeed, Huang portrayed himself as
such a manager.
    At this stage of the proceeding, we must accept the
allegations in the amended complaint as true. The
confidential witnesses were described with sufficient
particularity to establish their reliability. The complaint
describes FE 1 and FE 2’s job titles and experience. See
Quality Sys., 865 F.3d at 1145. Further, the amended
complaint explains how FE 1 and FE 2 obtained their
knowledge. FE 1 personally prepared presentations about
sales of GeForce GPUs to crypto miners in China. FE 1
further had frequent communications with high-ranking
NVIDIA executives about “the explosion of cryptocurrency-
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           39

related demand for GeForce GPUs.” FE 1’s role placed FE
1 in a reliable position to observe NVIDIA’s practice of
tracking who purchased its GPUs. Further, FE 1 wrote
weekly sales emails about the number of GeForce GPUs
being sold to crypto miners throughout 2017. FE 2’s basis
for personal knowledge is even stronger—FE 2 personally
met with Huang on a regular basis and reported to VPs who
reported directly to Huang. The level of detail provided by
FE 1 and FE 2 further establishes their reliability. See Zucco,
552 F.3d at 995.
    When these allegations are credited as true, Plaintiffs
have sufficiently pleaded scienter as to Huang under the
PSLRA. Even if no single allegation, standing alone, is
“sufficient to give rise to a strong inference of scienter,” a
holistic review of all the allegations may “combine to give
rise to a strong inference of scienter.” Glazer Cap. Mgmt.
L.P. v. Forescout Techs., Inc., 63 F.4th 747, 766 (9th Cir.
2023). A holistic review gives rise to such an inference in
this case. To summarize Plaintiffs’ allegations, they allege
that (1) Huang had detailed sale reports prepared for him; (2)
Huang had access to detailed data on both crypto demand
and usage of NVIDIA’s products; (3) Huang was a
meticulous manager who closely monitored sales data; and
(4) sales data at the time would have shown that a large
portion of GPU sales were being used for crypto mining.
Huang’s access and review of contemporaneous reports are
the most direct way to prove scienter. See Oracle, 380 F.3d
at 1230. Huang himself admitted to closely monitoring sales
data. Taken together, these allegations support a strong
inference that Huang reviewed sales data showing that a
large share of NVIDIA’s GeForce GPUs sold during the
Class Period were being used for crypto mining.
40        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

    As to Kress, however, Plaintiffs’ amended complaint has
not established a strong inference of scienter. The only
concrete allegation in the complaint that Kress had access to
contradictory information during the Class Period is FE 1’s
statements that Kress was authorized to access NVIDIA’s
centralized sales database, and that Kress “could direct VPs
. . . to forward the data” to her. These allegations are
insufficient to establish a strong inference that Kress
personally accessed contradictory information during the
Class Period. See City of Dearborn Heights Act 345 Police
& Fire Ret. Sys. v. Align Tech., Inc., 856 F.3d 605, 620 (9th
Cir. 2017) (finding allegations that defendant had access to
data room, standing alone, insufficient to establish actual
knowledge). Nor is there evidence that this data is the kind
of “relevant fact [] of such prominence that it would be
‘absurd’ to suggest that management was without
knowledge of the matter.” See S. Ferry LP, No. 2 v.
Killinger, 542 F.3d 776, 786 (9th Cir. 2008) (quoting
Berson, 527 F.3d at 988).
         3. Response to Our Dissenting Colleague
    Our dissenting colleague disagrees with the foregoing.
He contends that Plaintiffs have not sufficiently alleged
either falsity or scienter. Our opinion speaks for itself, and
we will not repeat what we have written above. However,
several of the points made by our colleague merit a specific
response.
                         a. Falsity
                i. Sufficiency of Allegations
    Plaintiffs allege in their amended complaint (1) that a
significant proportion of NVIDIA revenues during the Class
Period came from sales of its GeForce GPUs to crypto
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.         41

miners that were recorded in NVIDIA’s Gaming segment
rather than in its OEM segment; and (2) that Defendants
Huang and Kress falsely denied that those Gaming revenues
were based on sales of GeForce GPUs to crypto miners. Our
dissenting colleague contends that the complaint does not
sufficiently allege that Defendants’ representations were
false.
   Our colleague writes:

       [The     amended      complaint’s]    central
       contention—that NVIDIA executives falsely
       underreported cryptocurrency-related sales
       of graphic processing units (“GPUs”) by
       $1.126 billion over the proposed class
       period—is based entirely on a post hoc
       analysis by the Prysm Group (“Prysm”), an
       outside expert that relied on generic market
       research and unreliable or undisclosed
       assumptions to reach its revenue estimates.

Dissenting Op. at 54. He objects:

       We have never allowed an outside expert to
       serve as the primary source of falsity
       allegations where the expert has no personal
       knowledge of the facts on which their opinion
       is based, for example by corroborating their
       conclusions     with     specific     internal
       information or witness statements.

Id. We disagree with our colleague.
    First, Plaintiffs do not base their contention of falsity
entirely on the analysis of the Prysm Group. As detailed in
42        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

their amended complaint and as recounted above, Plaintiffs
rely as well on the independent analysis in the investigative
report of RBC, an international investment bank and
subsidiary of the Royal Bank of Canada. RBC’s conclusion
is almost identical to Prysm’s.
    Our colleague contends that the conclusions of the Prysm
Group and RBC are not similar. He writes, “[A]s the district
court pointed out, there is a $230 million difference between
RBC’s and Prysm’s revenue estimates.” Id. at 67. Both the
district court and our colleague fail to acknowledge that the
period RBC analyzed spanned eighteen months, while the
period analyzed by Prysm spanned fifteen months. Plaintiffs
point out in their amended complaint the different time spans
of the two analyses. As we wrote above, if RBC’s revenue
estimate is adjusted to reflect a fifteen-month rather than an
eighteen-month period, the estimates in the two analyses
match almost precisely: RBC ($1.125 billion); Prysm
($1.126 billion).
    In addition to the Prysm and RBC analyses, Plaintiffs
rely on the statements of FE 1, FE 2, and FE 4, all of whom
provide detailed accounts of crypto miners purchasing
GeForce GPUs in high volumes. Further, Plaintiffs point to
the inescapable and otherwise inexplicable fact that when the
price of cryptocurrency and the market for crypto mining
GPUs collapsed, NVIDIA was forced on November 15,
2018, at the end of the Class Period, to reduce its revenue
forecast by 7%.
   Second, contrary to what our dissenting colleague
contends, Prysm’s assumptions were neither undisclosed nor
unreliable. As we describe above, its analytic assumptions
were carefully disclosed and, more important, were
consistently conservative.
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           43

    Third, the totality of detailed allegations in Plaintiffs’
amended complaint easily satisfies the PSLRA pleading
standard for falsity. Prysm and RBC performed rigorous
market analyses to reach their independent but nearly
identical conclusions.      Contrary to our colleague’s
contention, the PSLRA nowhere requires experts to rely on
internal data and witness statements to prove falsity. It
merely requires that “the complaint [] state with particularity
all facts on which [the] belief [underlying an allegation of
falsity] is formed.” 15 U.S.C. § 78u-4(b)(1)(B). Prysm did
exactly that. To categorically hold that, to be credible, an
expert opinion must rely on internal data and witness
statements would place an onerous and undue pre-discovery
burden on plaintiffs in securities fraud cases. We decline to
turn “the PSLRA’s formidable pleading requirement into an
impossible one.” See Glazer Cap., 63 F.4th at 769.
     In any event, in the case before us, the amended
complaint contains both internal information and witness
statements. Some of the revenue information alleged in the
complaint is “internal information” that comes from the
Defendants themselves. Huang and Kress repeatedly and
publicly recited revenue figures for sales of NVIDIA’s
Crypto SKUs reported in the OEM segment. The failure of
those OEM-segment figures to include NVIDIA’s revenues
from sales of GeForce GPUs to crypto miners is at the heart
of Plaintiffs’ case. Other revenue information comes from
witnesses FE 1 and FE 4, whose statements are detailed and,
at this stage of the litigation, unimpeached. See Berson, 527
F.3d at 985 (finding statements from internal witnesses
sufficient to allege falsity).
    The sudden and substantial reduction of NVIDIA’s
earnings projection that followed collapse of crypto prices
lends further credence to Plaintiffs’ allegations of falsity.
44        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

See Glazer Cap., 63 F.4th at 768 (considering actual market
results relevant in determining whether statements were
false). Despite previously assuring investors that NVIDIA
was insulated from the volatility of crypto prices, when
finally forced to confront and explain NVIDIA’s revenue
drop, Huang attributed it to a “crypto hangover.” See Reese
v. Malone, 747 F.3d 557, 573 (9th Cir. 2014) (finding
defendant’s admissions that were inconsistent with previous
public statements were sufficient to support allegations of
falsity), abrogated on other grounds by Omnicare, Inc. v.
Laborers Dist. Council Constr. Indus. Pension Fund, 575
U.S. 175, 182–86 (2015). Industry analysts and investors
were surprised and dismayed at NVIDIA’s substantially
reduced earnings projections following the crypto crash.
Analysts stated that they had believed, based on Defendants’
previous statements, that NVIDIA’s increased revenues had
been based on sales of GeForce GPUs to gamers, not to
crypto miners. See No. 84 Emp.-Teamster Joint Council
Pension Tr. Fund v. Am. W. Holding, 320 F.3d 920, 933,
935–36 (9th Cir. 2003) (finding that plaintiffs sufficiently
pleaded materiality in their complaint that included analysts’
reactions).
                        ii. The Slide
    Our dissenting colleague places great weight on a slide
included in the amended complaint, and on an inaccurate
characterization of Plaintiffs’ attorney’s response to a
question about the slide at oral argument. The slide contains
a bar chart that had been prepared at the request of Defendant
Fisher for a presentation by NVIDIA’s “China team.” See
Dissenting Op. at 57 (reproducing the slide).
   Our colleague contends that the slide “reveals that the
Crypto SKU drew mining-related demand away from
           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           45

GeForce GPUs after its launch in May 2017—exactly what
Defendants described in their public statements.” Id. Our
colleague describes the slide and then characterizes
Plaintiffs’ attorney’s response to the presentation at oral
argument. He writes:

       Prior to the launch of the Crypto SKU, 100%
       of estimated mining-related demand was
       filled by gaming GPUs. By June, GeForce
       GPUs accounted for 64% of sales to miners
       in China, and by July, its proportion of sales
       had decreased to 27%. Thus, by July 2017,
       73% of estimated mining demand in China
       was fulfilled by sales of the Crypto SKU
       (271,884 units sold, compared to an
       estimated 100,000 GeForce GPUs sold). As
       Plaintiffs’ counsel effectively conceded at
       oral argument, at least with respect to the
       Chinese cryptocurrency market, the China
       study corroborates Defendants’ statements in
       2017 that the large majority of
       cryptocurrency demand was being met by
       Crypto SKU sales.

Id. at 57–58.
    Our colleague makes three mistakes.            First, he
misunderstands the nature and purpose of the slide. Second,
he misstates what is on the slide. Third, he mischaracterizes
Plaintiffs’ attorney’s response to his questions about the
slide.
    First, the slide was part of a presentation that hurt rather
than helped Defendants’ case. Far from relying on the slide,
Defendants run away from it. In their brief to us, they write
46        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

not only that Defendants never saw the slide. They also
write that the numbers in the slide are “estimates” that cannot
be trusted:

       Plaintiffs highlight a September 2017
       presentation with an analysis of mining’s
       impact in China, which allegedly included a
       “China sales team” estimate of NVIDIA’s
       share of estimated mining-related GPU sales
       in China during portions of 2017. Yet,
       Plaintiffs fail to allege that either Huang or
       Kress ever received the presentation or were
       aware of the “estimates” it contained. While
       Plaintiffs claim that Fisher “commissioned”
       the “study,” they do not allege that he ever
       received it . . . . Moreover, Plaintiffs provide
       zero explanation of how the estimates were
       arrived at, or of their reliability.

(Internal citations omitted; emphasis removed.)
    Defendants run away from the slide because it was part
of an internal NVIDIA presentation recommending an
aggressive plan to increase sales of GeForce GPUs—not
Crypto SKUs—for crypto mining in China. Another slide in
the presentation “reflected that, between January and
September 2017, NVIDIA had sold 1.5 million GeForce
GTX units to cryptocurrency miners in China.” “Based on
the conservative price point of $150 per unit (GTX GPUs
sell for as high as $800 per unit, depending on the model),
this sales number translated into a minimum of $225 million
in GeForce revenues from the China market alone.”
(Emphasis in original.) “Another slide, titled ‘New Market,
New Business Model,’ detailed how NVIDIA would exploit
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           47

the crypto-mining market to boost GeForce sales.”
“Reflecting NVIDIA’s eagerness to exploit the new
cryptocurrency boom’s effect on GeForce sales, a slide near
the end of the presentation listed ten large commercial
mining firms operating in China by name, next to which was
the mine owner’s name, cell phone number or email address,
existing mining GPUs, and ‘Monthly demand & forecast
(Units)’ . . . .”
    Second, our colleague states that “at least with respect to
the Chinese cryptocurrency market, the China study
corroborates Defendants’ statements in 2017 that the large
majority of cryptocurrency demand was being met by Crypto
SKU sales.” Dissenting Op. at 58. The “China study” and
the slide corroborate no such thing.
    The bar chart on the slide shows that 840,000 GeForce
GPUs were sold in China during four months—April
through July—beginning one month before the start of the
Class Period. It shows that during those four months,
485,878 Crypto SKUs were sold in China. Only in July did
sales of Crypto SKUs exceed sales of GeForce GPUs.
During the preceding three months, sales of GeForce GPUs
far exceeded sales of Crypto SKUs. During the four-month
period of Chinese sales covered by the slide, the “large
majority of cryptocurrency demand was being met” by sales
of GeForce GPUs rather than by sales of Crypto SKUs. At
the bottom of the slide is a statement that NVIDIA’s GPU
market share in China is greater than 70%.
    Our colleague contends that the bar chart, showing that
Crypto SKUs outsold GeForce GPUs in July 2017,
“illustrates” a “trend.” Id. There is nothing in the record to
show that this is so. Indeed, the Prysm study concluded just
the opposite. July 2017 was the last month in the second-
48        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

quarter fiscal year 2018, the first of the five quarters in the
Prysm study. In the third-quarter fiscal year 2018, the
second quarter in the study, global sales of GeForce GPUs
to crypto miners totaled about $229 million while sales of
Crypto SKUs totaled only about $70 million. That is, in the
three months immediately following July 2017, GeForce
GPUs outsold Crypto SKUs to crypto miners globally by a
ratio of over three to one. In the next quarter, that ratio was
over six to one.
    Our colleague faults us for “want[ing] to have it both
ways.” He contends that we are “arguing, on the one hand,
that [the slide] cannot be extrapolated to reflect global
cryptocurrency trends, while on the other hand relying on the
same market share estimate to buttress Prysm’s claim that
NVIDIA had a 69% share of the global cryptocurrency
market.” Id. (emphasis in original). We are not trying to
have it “both ways.”
     We do not argue that the slide, taken as a whole, cannot
be extrapolated. We argue only that our colleague’s
extrapolation from sales in July 2017, the last of the four
months shown on the slide, is unsupported. Nor do we argue
that it was improper for Prysm to use NVIDIA’s own
statement that its China market share was greater than 70%
to support Prysm’s global market share estimate of 69%.
The bar chart and the market share estimate on the slide both
tell a consistent story. They both show that NVIDIA sold an
enormous number of GeForce GPUs for crypto mining in
China.
    Third, our colleague puts words in Plaintiffs’ attorney’s
mouth. Our colleague contends that Plaintiffs’ attorney
“effectively conceded at oral argument, at least with respect
to the Chinese cryptocurrency market, the China study
           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           49

corroborates Defendants’ statements in 2017 that the large
majority of cryptocurrency demand was being met by Crypto
SKU sales.” Id. Plaintiffs’ attorney did no such thing. He
did not effectively concede that the large majority of
cryptocurrency demand in China was met by Crypto SKU
sales; nor did he effectively concede anything with respect
to sales in China outside of the four-month period.
    To set the stage for what Plaintiffs’ attorney actually said
at oral argument, we first recount a prior exchange between
our colleague and Defendants’ attorney:
       Q [by our colleague]: I looked at this slide
       and drew something else and I wanted to hear
       your thoughts about it. If the green bar for
       GTX—for the GeForce—it seems to be
       going down after the introduction of the
       crypto SKU. And if the grey bar is what
       represents the crypto SKU sales, then it does
       indeed seem by June and July that crypto was
       capturing more of the demand in the market.
       Am I reading that correctly from this
       particular slide, assuming we can extrapolate
       this information both to individual
       defendants and to global sales?
       A: Yes, and that's an important caveat. But
       yes, that’s how I would read that slide, as
       well.      And remember, the company
       introduced this new crypto SKU in May of
       2017. It’s a brand new product and a brand
       new market for them. And in the first three
       months they sold $150M worth of it. And I
       do think that kind of information would
       inform a judgment about how much of the
50        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

       mining demand they have been able to serve
       with this new product.
       Q: So, let me just make sure. So, if this slide
       accurately reflected global sales—and I
       know this is just China—then one could
       argue that this statement that the majority or
       vast majority—however you want to
       characterize it—of crypto SKU sales
       captured the mining demands would not be
       incorrect? If this were true.
       A: That’s how I would read it your honor.

(Emphases added.)
    To his credit, Defendants’ attorney did not overstate the
importance of the slide. After our colleague said, “assuming
we can extrapolate this information both to the individual
defendants and to global sales,” Defendants’ attorney
responded, “[T]hat’s an important caveat.” After our
colleague hypothesized “if the slide accurately reflected
global sales” and posited “[i]f this were true,” Defendants’
attorney responded, given the two “ifs,” that he would also
so read the slide. Defendants’ attorney never said, or even
suggested, that the slide should be extrapolated to sales
outside China and outside the specified four-month period.
    When Plaintiffs’ attorney came to the podium for
rebuttal, he immediately responded to the exchange between
our colleague and Defendants’ attorney. He said:

       Let me address the chart first, all right? And
       your honor’s question, can it be generalized,
       that this trend for this period of time
       extended. And the answer is that’s why
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.         51

       Plaintiff’s counsel had an independent
       economic study done.

    Far from “effectively conced[ing]” that “the large
majority of cryptocurrency demand was being met by Crypto
SKU sales” in China in 2017, Plaintiffs’ attorney responded
that counsel “had an independent economic study done” to
determine whether the four-month data from China could be
“generalized” and “extended” to determine global sales. As
described above, the Prysm study determined that the July
2017 sales data, upon which our colleague relies, could not
be generalized and extended. However, it determined that
the sales data for the full four months depicted on the slide
could be generalized and extended. Relying in part on the
sales data on the slide, the Prysm study concluded that
NVIDIA hid approximately $1.126 billion in GeForce GPU
sales to crypto miners during a fifteen-month period. The
RBC study determined the same thing for a longer period.
According to RBC, NVIDIA hid $1.35 billion in GeForce
GPU sales during an eighteen-month period.
                        b. Scienter
    In their amended complaint, Plaintiffs provide a number
of reasons supporting a conclusion that Huang, the CEO of
NVIDIA, knew that more than a billion dollars in company
revenues came from selling GeForce GPUs to crypto miners.
We state the obvious. A CEO who does not know the source
of $1.126 billion in company revenues during fifteen-month
period, or $1.35 billion during an eighteen-month period, is
unlikely to exist. Or if such a CEO does exist, he or she is
not likely to remain CEO for very long. It is “reasonable to
infer” that Huang’s “detail-oriented management style”
would have led him “to become aware of” the source of more
than a billion dollars in company revenue during a fifteen-
52         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

or eighteen-month period. See Oracle, 380 F.3d at 1234 (“It
is reasonable to infer that Oracle executives’ detail-oriented
management style led them to become aware of the allegedly
improper revenue recognition of such significant magnitude
that the company would have missed its quarterly earnings
projections but for the adjustments.”).
            B. Section 20(a) of the Exchange Act
    The amended complaint alleges that individual
Defendants violated Section 20(a) of the Exchange Act, 15
U.S.C. § 78t, “which assigns joint and several liability for
any person who ‘controls any person liable’ under Section
10(b).” Quality Sys., 865 F.3d at 1149 (quoting 15 U.S.C.
§ 78t(a)). Section 20(a) requires plaintiff to allege (1) a
primary violation of federal securities law; and (2) that
defendant exercised actual power or control over the primary
violator. Howard v. Everex Sys., Inc., 228 F.3d 1057, 1065
(9th Cir. 2000) (citing Hollinger v. Titan Cap. Corp., 914
F.2d 1564, 1575 (9th Cir. 1990)).
    Because we hold that the amended complaint does not
sufficiently plead a cause of action under Section 10(b) of
the Exchange Act and Rule 10b-5 against Defendants Kress
and Fisher, the only alleged primary violation is that
committed by NVIDIA through its CEO, Defendant Huang.
Plaintiffs fail to allege that Kress and Fisher exercised actual
power or control over Huang. See Paracor Fin., Inc. v. Gen.
Elec. Cap. Corp., 96 F.3d 1151, 1163–64 (9th Cir. 1996)
(noting that merely being an officer of a corporation does not
establish control). However, neither party briefed whether
(1) NVIDIA can be deemed a primary violator through
imputation; and (2) Huang’s control over his own conduct
can satisfy Section 20(a).
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.         53

    Therefore, while we affirm the district court’s dismissal
of Plaintiffs’ Section 20(a) claims against Defendants Kress
and Fisher, we vacate the district court’s dismissal of the
Section 20(a) claims as to Defendant Huang and remand for
further proceedings as to those claims.
                        Conclusion
    We hold that Plaintiffs have stated a claim for relief
under Section 10(b) and Rule 10b-5 against Defendants
Huang and NVIDIA, but not against Defendants Kress and
Fisher. The amended complaint sufficiently alleges that,
during the Class Period, Huang made false or misleading
statements and did so knowingly or recklessly. “While the
PSLRA ‘significantly altered pleading requirements in
private securities fraud litigation,’ it did not impose an
insurmountable standard.” In re VeriFone Holdings, Inc.
Sec. Litig., 704 F.3d 694, 708 (9th Cir. 2012) (internal
citation omitted) (quoting Daou, 411 F.3d at 1014). We
reverse and remand for further proceedings consistent with
this opinion.
   The parties shall bear their own costs on appeal. See Fed.
R. App. P. 39(a)(4).
  AFFIRMED in part, REVERSED in part, and
REMANDED.
54        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

SANCHEZ, J., dissenting:

    The Private Securities Litigation Reform Act of 1995
(“PSLRA”) imposes “formidable pleading requirements to
properly state a claim” for securities fraud. Glazer Cap.
Mgmt., L.P. v. Forescout Techs., Inc., 63 F.4th 747, 765 (9th
Cir. 2023) (quoting Metzler Inv. GMBH v. Corinthian Colls.,
Inc., 540 F.3d 1049, 1055 (9th Cir. 2008)). “Congress
enacted the PSLRA to put an end to the practice of pleading
fraud by hindsight.” In re Daou Sys. Inc. Sec. Litig., 411
F.3d 1006, 1021 (9th Cir. 2005) (internal quotation marks
and citation omitted). To survive dismissal under the
PSLRA, a complaint must “specify each statement alleged
to have been misleading [and] the reason or reasons why the
statement is misleading” to allege the element of falsity
adequately, and “state with particularity facts giving rise to
a strong inference that the defendant acted with the required
state of mind” to allege the element of scienter. 15 U.S.C.
§ 78u–4(b)(1)–(2).
    Plaintiffs’ first amended complaint (“FAC”) does not
meet these exacting pleading requirements. The FAC’s
central contention—that NVIDIA executives falsely
underreported cryptocurrency-related sales of graphic
processing units (“GPUs”) by $1.126 billion over the
proposed class period—is based entirely on a post hoc
analysis by the Prysm Group (“Prysm”), an outside expert
that relied on generic market research and unreliable or
undisclosed assumptions to reach its revenue estimates. We
have never allowed an outside expert to serve as the primary
source of falsity allegations where the expert has no personal
knowledge of the facts on which their opinion is based, for
example by corroborating their conclusions with specific
internal information or witness statements.
           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           55

    Further, Plaintiffs’ allegations do not raise a strong
inference of scienter. The FAC does not allege with
particularity the contents of any internal report or data source
that would have put NVIDIA’s executives on notice that
their public statements were false or misleading when made,
much less any internal source that corroborated Prysm’s
revenue estimates. Indeed, the only specific allegation the
FAC makes of an internal study that examined
cryptocurrency-related GPU sales in China supports
Defendants’ statements that most of the cryptocurrency
demand was serviced by a new product designed specifically
for cryptocurrency miners—the “Crypto SKU.” At bottom,
Plaintiffs’ theory that Defendants launched the crypto card
to deliberately mislead investors about the true extent of
cryptocurrency revenues earned in its Gaming segment does
not present a cogent or compelling inference of scienter
under the PSLRA. Because the district court did not err in
dismissing Plaintiffs’ case, I respectfully dissent.
                  I.      BACKGROUND
    Plaintiffs contend that NVIDIA violated federal
securities laws by concealing the extent to which NVIDIA’s
gaming GPUs, including its flagship product, the GeForce
GPU, were sold downstream to cryptocurrency miners
during a proposed class period from May 2017 through
November 2018. The majority’s factual recitation omits
important context for analyzing Plaintiffs’ allegations of
fraud.
    NVIDIA executives made no secret of the fact that
demand for its GPUs increased in 2017 as prices for certain
cryptocurrencies rose and miners began purchasing GPUs
for computational tasks. On an August 10, 2017, second-
quarter earnings call, NVIDIA’s Executive Vice President
56          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

and Chief Financial Officer, Colette Kress, stated that “GPU
sales were lifted by demand from increasingly mining
activity, or Ethereum.” 1 NVIDIA co-founder and Chief
Executive Officer Jensen Huang added that the company
was responding to this demand by “offer[ing] the coin
miners a special coin-mining SKU, [a] . . . GPU
configuration . . . optimized for mining.”
    NVIDIA launched the Crypto SKU in May 2017, a GPU
designed specifically for miners. Crypto SKUs have the
same processing power as other NVIDIA GPUs but were
stripped of the video functionality required for gaming.
According to NVIDIA executives, the Crypto SKU was
introduced to address new mining demand while ensuring
adequate supplies of GPUs for its gaming end users.
Because the new crypto cards could not be used for gaming,
revenues from Crypto SKU sales were reported in the
company’s Original Equipment Manufacturer and
Intellectual Property (“OEM”) segment rather than the
Gaming segment. The Crypto SKU gave NVIDIA and
investors greater visibility into the revenue stream from
cryptocurrency demand, and selling a dedicated crypto card
reduced the likelihood that when cryptocurrency prices fell,
miners would dump these GPUs onto a secondary market
and collapse demand for NVIDIA’s gaming GPUs.
    The FAC highlights an internal study prepared in
September 2017 that estimated NVIDIA’s cryptocurrency-
related sales in China.

1
 As the majority explains, NVIDIA’s fiscal year 2018 quarters cover the
following periods: February to April 2017 (1Q); May to July 2017 (2Q);
August to October 2017 (3Q); November 2017 to January 2018 (4Q).
                   E. OHMAN J:OR FONDER AB V. NVIDIA CORP.       57

Figure F. Sept. 2017 NVIDIA China Cryptocurrency Study
Source: NVIDIA Corp.

      In one slide of the study, labeled Figure F, Plaintiffs allege
      that NVIDIA sold an estimated 800,000 GeForce GTX
      GPUs to miners in China from May through July 2017.
      Plaintiffs also rely on Figure F to assert that NVIDIA’s share
      of the cryptocurrency market in China was estimated to be
      70%.
          Figure F reveals that the Crypto SKU drew mining-
      related demand away from GeForce GPUs after its launch in
      May 2017—exactly what Defendants described in their
      public statements. Prior to the launch of the Crypto SKU,
      100% of estimated mining-related demand was filled by
      gaming GPUs. By June, GeForce GPUs accounted for 64%
      of sales to miners in China, and by July, its proportion of
      sales had decreased to just 27%. Thus, by July 2017, 73%
      of estimated mining demand in China was fulfilled by sales
58          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

of the Crypto SKU (271,884 units sold, compared to an
estimated 100,000 GeForce GPUs sold). As Plaintiffs’
counsel effectively conceded at oral argument, at least with
respect to the Chinese cryptocurrency market, the China
study corroborates Defendants’ statements in 2017 that the
large majority of cryptocurrency demand was being met by
Crypto SKU sales. 2
    My colleagues in the majority seek to explain away
Figure F by arguing that the trend it illustrates—Crypto SKU
sales overtaking GeForce GPU sales in China—cannot be
generalized beyond the four-month period it displays or
beyond the Chinese market. See Majority Op. at 47–51. The
majority wants to have it both ways: arguing, on the one
hand, that Figure F cannot be extrapolated to reflect global
cryptocurrency trends, while on the other hand relying on the
same market share estimate to buttress Prysm’s claim that
NVIDIA had a 69% share of the global cryptocurrency
market. See Majority Op. at 20–21. The majority even
claims that there is no evidence of a trend because sales of
Crypto SKU only overtook GeForce GPU sales in July.
Lumping together the prior three months of GeForce GPU
sales (including the month before the launch) ignores the
obvious point—the Crypto SKU captured 73% of estimated
mining demand in China within three months of its
introduction in May.

2
  Plaintiffs’ counsel did not dispute the suggestion that demand for
Crypto SKUs was overtaking demand for GeForce GPUs in China.
Instead, Plaintiffs’ counsel addressed the slide by noting that “the
experience in China is the experience in China,” but their “independent
economic study” (referring to the Prysm report) gave different sales
estimates “outside” of China. In other words, Plaintiffs’ counsel was
acknowledging the impact of the Crypto SKU on sales in China but
arguing it should not be generalized to global sales.
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.          59

    To be clear, there are many reasons to question the
reliability of the China study. Plaintiffs do not allege any
facts demonstrating that Defendants Huang or Kress ever
saw this study. Nor do Plaintiffs describe what sources of
information or analyses the study relied upon for its estimate
of GPU sales or NVIDIA’s share of the cryptocurrency
market in China. The point is, even if the internal China
study were deemed sufficiently reliable, its information
serves to confirm rather than undercut Defendants’
challenged public statements in August and September
2017.
    On an August 2017 earnings call, Huang stated that the
“large majority of the cryptocurrency demand [was now
served] out of that specialized product[],” reporting $150
million in revenues from the sale of Crypto SKUs in the
second quarter. Kress stated that NVIDIA served a “large
portion of this specialized [cryptocurrency] market” with the
dedicated cryptocard while acknowledging that miners
continued buying both GeForce GPUs and Crypto SKUs.
Kress made the same points at a September 6, 2017, business
conference for investors. Plaintiffs have not identified any
internal report or data source that contradicts these public
statements.
    From spring 2017, the start of the proposed class period,
to January 2018, Ethereum rose from $400 per token to
$1,400 per token. During a third-quarter earnings call on
November 9, 2017, Kress reported $1.56 billion in gaming
revenue and $70 million in OEM revenue.                Kress
acknowledged that “GPU sales also benefited from
continued cryptocurrency mining. We met some of this
demand with a dedicated board in our OEM business and a
portion with GeForce [GPU], though it’s difficult to
quantify.” At a company presentation on November 29,
60         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

2017, Kress was asked again to quantify how much
cryptocurrency demand was reflected in gaming revenue.
Kress explained that the Crypto SKU had been introduced to
“make sure that we supplied the overall cards that we needed
to our gamers . . . . However, in certain times, if there is not
the overall availability [of Crypto SKUs] and/or if price of
Ethereum reaches high levels,” a certain portion of sales will
involve purchasers who use gaming cards for both “gaming
and mining at the same time.” Kress added, “[T]here
probably is some residual amount or some small amount” of
those purchases that NVIDIA cannot “visibly count” but
“[w]e do believe the majority does reside in terms of our
overall [Crypto SKU].”
    On February 8, 2018, NVIDIA reported financial results
for the fourth quarter ending January 28, 2018. Over the
fourth quarter, the price of Ethereum surged from $276 per
token to a high of $1,422 per token. During that earnings
call, Kress again addressed the impact of Ethereum price
increases on NVIDIA’s business segments:

       Strong demand in the cryptocurrency market
       exceeded our expectations. We met some of
       this demand with a dedicated board in our
       OEM business, and some was met with our
       gaming GPUs. This contributed to lower
       than historical channel inventory levels of
       our gaming GPUs throughout the quarter.
       While the overall contribution of
       cryptocurrency to our business remains
       difficult to quantify, we believe it was a
       higher percentage of revenue than the prior
       quarter. That said, our main focus remains on
            E. OHMAN J:OR FONDER AB V. NVIDIA CORP.                61

        our core gaming market as cryptocurrency
        trends will likely remain volatile. 3

Huang also noted that “there’s a fairly sizeable pent-up
demand going into this quarter” for gaming GPUs caused by
limited channel inventory and high prices being charged at
the retail level. Gamers were getting priced out of the market
for GeForce GPUs, and because NVIDIA does not “set
prices at the end of the market,” Huang explained that “the
best way for us to solve this problem” is “to keep working
on the supply” of GeForce GPUs.
    On May 10, 2018, NVIDIA announced its financial
results for the first quarter of fiscal year 2019, reporting
gaming revenue of $1.72 billion and Crypto SKU revenue of
$289 million. Kress reported the supply of GPUs was “now
easing,” with channel prices “beginning to normalize,
allowing gamers who had been priced out of the market last
quarter to get their hands on the new GeForce [GPU] at a
reasonable price.” Kress added, “Cryptocurrency demand
was again stronger than expected, but we were able to fulfill
most of it with crypto-specific GPUs” and “[a]s a result, we
could protect the vast majority of our limited GPU supply
for use by gamers.”
     In 2018, the price of Ethereum began a precipitous fall
from its January peak. By late March, the price of Ethereum
had fallen below $400 and by November it had fallen below
$200 per token. On August 16, 2018, NVIDIA announced
its financial results for the second quarter, reporting OEM
revenues from the Crypto SKU at just $18 million. Kress
stated that the company was now projecting no contributions

3
 Plaintiffs do not allege that any false or misleading statements were
made on this earnings call.
62        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

from cryptocurrency going forward. NVIDIA lowered its
third-quarter revenue guidance by 2.2% to $3.25 billion.
When asked to “look[] backwards” to estimate the size of
GeForce GPU business driven by cryptocurrency, Huang
responded,

       It’s hard to estimate no matter what. . . . [As
       for] how much of GeForce could have been
       used for crypto, a lot of gamers at night, they
       could—while they’re sleeping, they could do
       some mining. And so[,] whether they buy it
       for mining or . . . for gaming, it’s kind of hard
       to say. And some miners were unable to buy
       our OEM products, and so they jumped onto
       the market to buy it from retail. And that
       probably happened a great deal as well.

    On November 15, 2018, NVIDIA announced it had
missed revenue projections for the third quarter by 2%.
Kress stated that “[g]aming [revenue] was short of
expectations” because “post crypto channel inventory took
longer than expected to sell through” as “[g]aming card
prices, which were elevated following the sharp crypto
falloff, took longer than expected to normalize.” NVIDIA
announced a further 7% decline in revenue the following
quarter when compared to the prior year. NVIDIA’s stock
dropped 28.5% over the next two trading sessions. This
lawsuit followed.
                     II.     FALSITY
   Plaintiffs’ securities fraud action rests on the theory that
Defendants knew but concealed the extent to which GeForce
GPUs were purchased downstream by cryptocurrency
miners over the proposed class period. The FAC challenges
            E. OHMAN J:OR FONDER AB V. NVIDIA CORP.                 63

thirteen statements made by NVIDIA executives as false or
misleading because the statements failed to disclose the true
extent of cryptocurrency-related revenues in NVIDIA’s
Gaming segment. 4
     To establish the falsity of these statements, Plaintiffs rely
almost entirely on an expert report prepared by Prysm, an
economic consulting firm hired for this litigation. Plaintiffs
allege that Prysm “performed a rigorous demand-side
analysis to determine the amount of NVIDIA revenues
attributable to crypto-related sales from May 2017 through
July 2018.” Prysm estimated that NVIDIA earned $1.728
billion from cryptocurrency-related revenue over the fifteen-
month period. Because NVIDIA reported $602 million in
revenue in its OEM segment from the sale of Crypto SKUs
over that period, Prysm concluded that NVIDIA had
understated its crypto-related GeForce GPU sales by $1.126
billion. Relying on Prysm’s revenue estimates, Plaintiffs
prepared a chart depicting, on a fiscal quarter-by-quarter
basis, the amount of cryptocurrency-related revenue
Defendants allegedly failed to disclose over the class period.
See Majority Op. at 18 (reproducing the chart).
    Although the adequacy of Plaintiffs’ falsity allegations
was not addressed by the district court in its dismissal of the
FAC, the majority reaches that question here. The majority
determines, based on Prysm’s after-the-fact revenue
estimates, that Defendants Huang and Kress made materially
false or misleading statements when they failed to disclose
that “a very substantial part” of NVIDIA’s Gaming segment
included crypto-related revenue. Majority Op. at 23. For
example, the majority concludes that Huang’s report of $150

4
 For the reasons explained by the majority, I agree that Defendant Jeff
Fisher’s statement, made on May 10, 2017, is not actionable.
64         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

million in revenues from Crypto SKU sales on an August 10,
2017, earnings call was materially false or misleading
because “Huang failed to say that during that same quarter
NVIDIA had received about $349 million in crypto-related
revenues, of which about $199 million was due to sales of
GeForce GPUs.” Majority Op. at 24. The majority
essentially concludes that Plaintiffs have adequately alleged
falsity merely by showing that Defendants’ statements
concerning cryptocurrency-related revenues diverged from
Prysm’s post hoc revenue estimates.
    Our precedent permits a plaintiff in a securities fraud
action to support allegations of falsity with an expert
opinion. See, e.g., Nursing Home Pension Fund, Loc. 144 v.
Oracle Corp., 380 F.3d 1226, 1233–34 (9th Cir. 2004);
Glazer, 63 F.4th at 768. But we have never before allowed
an outside expert to serve as the primary source of falsity
allegations under the PSLRA where the expert relies almost
exclusively on generic market research and without any
personal knowledge of the facts on which their opinion is
based. Under the PSLRA, Plaintiffs must describe their
experts’ allegations “with sufficient particularity to establish
that they [are] in a position to know” the basis for their
opinion. Oracle, 380 F.3d at 1228.
     In Oracle, plaintiffs alleged that Oracle released a
defective software product that sold poorly and “covered up
its losses by creating phony sales invoices and improperly
recognizing past customer overpayments as revenue.” Id. In
reaching the conclusion that Oracle had improperly
characterized $228 million in customer overpayments as
revenue, plaintiffs’ expert reviewed the billing and payment
histories of several Oracle customers and interviewed
several Oracle employees. Id. at 1233. We observed that
the complaint had alleged with particularity the grounds
           E. OHMAN J:OR FONDER AB V. NVIDIA CORP.            65

upon which the expert based his conclusions, including the
contents of internal documents reviewed by the expert and
information he had learned from former employees. Id.
“More importantly,” we emphasized, the billing and
payment histories analyzed by the expert “themselves appear
to establish improper revenue adjustment,” directly
corroborating the expert’s assessment. Id.
    Here, in contrast, Plaintiffs do not allege that Prysm’s
revenue estimates are based on information provided by any
current or former NVIDIA employee or any internal report
or data source. Rather, Prysm’s “demand-side” analysis
relies on a series of assumptions drawn from generic market
research. First, Prysm estimates the amount of additional
computing power (known as the “hashrate”) being used to
mine cryptocurrency tokens in three popular blockchain
networks; second Prysm approximates the total number of
GPU units that would need to be sold to account for this
computational need; third, Prysm reckons NVIDIA’s share
of GPU sales based on the company’s estimated market
share of the cryptocurrency market; finally, Prysm provides
its best guess about NVIDIA’s total cryptocurrency-related
revenues by applying an average manufacturer’s suggested
retail price for each estimated GPU unit sold (along with
further estimated adjustments to the retail markup).
    The district court dismissed Plaintiffs’ earlier
consolidated class action complaint (“CCAC”) for failure to
adequately plead both falsity and scienter. The district court
concluded that Plaintiffs’ falsity allegations did not satisfy
the PSLRA’s pleading standards because Plaintiffs “fail[ed]
to describe Prysm’s assumptions and analysis with sufficient
particularity to establish a probability that its conclusions are
reliable.” For example, Plaintiffs provided “no allegations
supporting a major assumption underlying the expert
66          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

analysis: that NVIDIA’s market share in the crypto mining
market is equal to its market share in the gaming market.”
As the district court observed, if NVIDIA’s mining market
share is lower than its gaming market share, Prysm’s report
“could significantly overstate NVIDIA’s estimated revenues
from mining.” 5 In response, Plaintiffs’ FAC removed all
reference to the third-party market researcher that had
equated NVIDIA’s gaming and cryptocurrency market share
and alleged instead that Prysm was now relying on a
different third-party market analyst (“Peddie Report”),
which estimated NVIDIA’s share of the global GPU mining
market to be 69%. Despite substituting one material
assumption for another, Prysm’s estimate of NVIDIA’s
cryptocurrency revenues over the class period remained
precisely the same.
    Plaintiffs’ amended allegations do not cure the
deficiencies found by the district court.   Plaintiffs
acknowledge that the Peddie Report uses “proprietary
analytic models to estimate NVIDIA’s market share,”
meaning there is no way to know from the FAC how the
Peddie Report determined NVIDIA’s share of the

5
 The district court also noted that Defendants challenged the adequacy
of several other assumptions made by Prysm:
        The Complaint does not explain, among other things,
        the relevance of other cryptocurrencies focused on by
        Prysm, the source of the hashrate data, what demand
        (if any) Prysm assumed was met with [application-
        specific integrated circuits] or other non-GPU
        products, which of the “various popular GPUs” Prysm
        considered in its calculations, what market share data
        was used, or what Prysm’s “conservative price and
        hashrate estimates” were.
Many of these assumptions remain unexplained in the FAC.
            E. OHMAN J:OR FONDER AB V. NVIDIA CORP.                  67

cryptocurrency market. This is a critical omission, as
Prysm’s estimate of NVIDIA’s market share forms the
baseline multiplier for NVIDIA’s estimated revenue from
miners over the class period. Without knowing the basis for
this input, one cannot ascertain the reliability of the output.
The majority asserts that Prysm provides a “detailed analysis
to support its conclusions,” but never addresses this glaring
omission. See Majority Op. at 19–22. In addition, the
Peddie Report’s market-share estimates were for just two
quarters in 2017, and the FAC alleges no facts to support
Prysm’s assumption that market share throughout the class
period can be reliably extrapolated from this limited period.
    Plaintiffs contend that Prysm’s estimates are
nevertheless reliable because another market analyst, Royal
Bank of Canada Capital Markets (“RBC”), also concluded
that NVIDIA had understated crypto-related revenue by
$1.35 billion from February 2017 to July 2018. But the FAC
does not describe in any detail RBC’s own assumptions or
sources of information to estimate NVIDIA’s
cryptocurrency market share or overall cryptocurrency
revenues. And as the district court pointed out, there is a
$230 million difference between RBC’s and Prysm’s
revenue estimates. 6
   The majority repeats the same error. It contends that
Prysm’s revenue estimates and cryptocurrency market share

6
  The majority contends there is not an actual difference between RBC’s
revenue estimate and Prysm’s revenue estimate if RBC’s estimate is
adjusted to reflect a fifteen-month period rather than an eighteen-month
period. See Majority Op. at 42. But because the FAC alleges no facts to
support how RBC estimated NVIDIA’s cryptocurrency market share to
be 75% or other assumptions underlying its analysis, this begs the
question whether such an adjustment is grounded in any reliable source
or methodology.
68         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

assumptions are corroborated by the RBC report. See
Majority Op. at 21–23. Plaintiffs cannot satisfy the
PSLRA’s heightened pleading requirements by pointing to
another third-party report that itself fails to disclose material
assumptions or methods of analysis. See In re Nektar
Therapeutics Sec. Litig., 34 F.4th 828, 837 (9th Cir. 2022)
(“Plaintiffs cannot evade the PSLRA’s exacting pleading
standards by merely citing an expert who makes assertions
about falsity based on questionable assumptions and
unexplained reasoning.”). Prysm’s cryptocurrency-revenue
estimates amount to a series of educated guesses about the
computational power needed to support certain blockchain
networks and NVIDIA’s potential sales of GPUs to meet this
estimated demand. But because the FAC fails to describe in
sufficient detail the basis for Prysm’s estimate of NVIDIA’s
cryptocurrency market share or other core assumptions
underlying Prysm’s revenue estimates, the complaint fails to
establish the reliability of Prysm’s conclusions.
    The majority defends Prysm’s analysis as written by two
credentialed authors who specialize in the economics of
blockchain and who applied “conservative” estimates at
several steps along the way of their analysis. However
qualified the authors may be to offer generalized allegations
about cryptocurrency economics, the amended complaint
does not plead with particularity facts establishing that the
Prysm report’s authors were “in a position to know” what
NVIDIA’s own internal revenue reporting showed. Oracle,
380 F.3d at 1233. “The most direct way to show both that a
statement was false when made and that the party making
the statement knew that it was false is via contemporaneous
reports or data, available to the party, which contradict the
statement.” Id. at 1230. Unlike the complaint in Oracle, the
FAC does not allege that Prysm reviewed any internal
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.          69

documents or relied on any NVIDIA employee interviews to
corroborate its revenue estimates, nor does it allege with
particularity the contents of any contemporaneous report that
directly contradicts Defendants’ challenged statements. See
id. at 1233; see also Lipton v. Pathogenesis Corp., 284 F.3d
1027, 1036 (9th Cir. 2002) (“[A] proper complaint which
purports to rely on the existence of internal reports would
contain at least some specifics from these reports as well as
such facts as may indicate their reliability.” (internal
quotation marks omitted)).
    The majority’s approach significantly erodes the
heightened pleading requirements for alleging securities
fraud under the PSLRA. Our precedent establishes that for
both confidential and expert witnesses, plaintiffs must
describe these witnesses with “sufficient particularity to
support the probability that a person in the position occupied
by the source would possess the information alleged.”
Oracle, 380 F.3d at 1233 (quoting Novak v. Kasaks, 216
F.3d 300, 314 (2d Cir. 2000)). Under the majority’s
reasoning here, however, falsity can be established simply
by producing an expert witness whose post hoc calculations
diverge from a defendant’s prior public statements, even
when the complaint fails to allege any facts to establish that
the expert’s conclusions correspond to what a company’s
internal data or documents might have shown. See Khoja v.
Orexigen Therapeutics, Inc., 899 F.3d 988, 1008 (9th Cir.
2018) (“Falsity is alleged when a plaintiff points to
defendant’s statements that directly contradict what the
defendant knew at the time.” (emphasis added)). I do not
suggest that an expert opinion must rely on internal data or
witness statements to be found reliable for purposes of
particularized pleadings under the PSLRA. But when Prysm
does not rely on any internal data source or employee as a
70         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

basis for its revenue estimates, and Plaintiffs have also failed
to allege with particularity the contents of any internal data
source or report that could corroborate Prysm’s revenue
estimates, Plaintiffs’ allegations are inadequately pled. Far
from being an impossible standard, we have consistently
applied such a requirement. See, e.g., Oracle, 380 F.3d at
1233; Nektar, 34 F.4th at 837; Glazer, 63 F.4th at 768.
    Finally, the majority contends that the statements of
several former employees (“FEs”) support Prysm’s
conclusions. FE 1, a senior account manager in China,
alleged that “beginning in 2016 and continuing through
2017, mining enterprises placed huge orders for GeForce
GPUs from NVIDIA’s partners [in China], often in
quantities of 50,000 or 100,000 per order.” FE 2, a senior
products director in Santa Clara, California, observed that
“GeForce Gaming GPUs were the clear favorites among
crypto-miners.” FE 4, a community manager in Russia,
described ongoing demand for GeForce GPUs by
cryptocurrency miners in Russia in 2017 and the first half of
2018. These allegations do not establish the falsity of
Defendants’ statements or corroborate Prysm’s revenue
estimates. That cryptocurrency miners purchased gaming
GPUs in 2016 and 2017 does not reveal fraud—it is the
reason NVIDIA executives publicly expressed for launching
the Crypto SKU in the first place. The relevant question is
not whether Plaintiffs have plausibly alleged that
cryptocurrency miners purchased large quantities of
GeForce GPUs before or during the class period. The
relevant question is whether Plaintiffs have alleged with
particularity facts demonstrating that Defendants
misrepresented cryptocurrency-related sales after the launch
of the Crypto SKU in May 2017. The FE allegations do not
address the impact of the Crypto SKU on mining demand or
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           71

demonstrate how any challenged statement directly
contradicted what Defendants knew at the time.
Accordingly, I would conclude that the FAC does not
adequately allege that Defendants’ statements were false or
misleading.
                    III.    SCIENTER
    Plaintiffs have also failed to adequately plead the
element of scienter, an independent basis for affirming the
district court’s dismissal of the FAC. Under the PSLRA, a
plaintiff 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)(A). To demonstrate
that the defendant acted with the required state of mind, a
complaint must “allege that the defendants made false or
misleading statements either intentionally or with deliberate
recklessness.” Zucco Partners, LLC v. Digimarc Corp., 552
F.3d 981, 991 (9th Cir. 2009) (quoting Daou Sys., 411 F.3d
at 1015). “[D]eliberate recklessness” is more than “mere
recklessness or a motive to commit fraud.” Schueneman v.
Arena Pharms., Inc., 840 F.3d 698, 705 (9th Cir. 2016)
(quoting Zucco, 552 F.3d at 991). Rather, it involves “an
extreme departure from the standards of ordinary care,”
which “presents a danger of misleading buyers or sellers that
is either known to the defendant or is so obvious that the
actor must have been aware of it.” Id. (quoting Zucco, 552
F.3d at 991). A securities fraud complaint will survive
dismissal “only if a reasonable person would deem the
inference of scienter cogent and as least as compelling as any
opposing inference one could draw from the facts alleged.”
Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308, 324
(2007).
72        E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

    We have held allegations of scienter adequately pled in
cases where the complaint alleged the existence of specific
internal information, specific access to that information by
the relevant principles, and specific public statements that
directly contradict the internal information accessed by the
defendants. See, e.g., Oracle, 380 F.3d at 1231; In re Quality
Sys., Inc. Sec. Litig., 865 F.3d 1130, 1145 (9th Cir. 2017);
Glazer, 63 F.4th at 772.
     In Oracle, for example, plaintiffs alleged “hard numbers
and ma[d]e specific allegations regarding large portions of
Oracle’s sales data,” “the top executives admit[ted] to
having monitored the database,” and Oracle’s CEO admitted
he was “heavily involved in an awful lot of th[e] deals” that
fell through in the third quarter, even as Oracle executives
were making optimistic assessments to the public. 380 F.3d
at 1231, 1232–33. In Quality Systems, we concluded that
“statements by confidential witnesses establish[ed] that
members of executive-level management, including
individual defendants, had access to and used reports
documenting in real time the decline in sales during the
[c]lass [p]eriod.” 865 F.3d at 1145. In both cases, plaintiffs
also alleged that corporate insiders sold large quantities of
their stock holdings shortly before the public release of
negative information, giving rise to a “strong inference” that
those defendants were aware of specific internal information
that contradicted their optimistic public statements
concerning future sales. Id. at 1146; Oracle, 380 F.3d at
1232; see also In re Silicon Graphics Inc. Sec. Litig., 183
F.3d 970 (9th Cir. 1999), as amended (Aug. 4, 1999),
superseded by statute on other grounds as recognized in
Quality Sys., 856 F.3d at 1146.
   More recently, we concluded in Glazer that plaintiffs
adequately alleged scienter based on particularized
            E. OHMAN J:OR FONDER AB V. NVIDIA CORP.                  73

allegations that a cybersecurity company was struggling to
meet sales targets and sales representatives “were pressured
by senior executives to identify numerous seven-figure deals
as ‘committed’ when, in fact, the buyers had no interest.” 63
F.4th at 769, 772. Plaintiffs’ complaint included statements
from twenty confidential witnesses, several of whom gave
firsthand accounts of company executives pressuring them
to characterize illusory deals as “committed” so that these
deals would be reflected in revenue forecasts. Id. at 772.
Plaintiffs also alleged that defendants had access to
information about the sales pipeline through an internal
reporting system that provided specific information about
“deals valued at $500,000 or more, . . . the status of
negotiations, the steps remaining to close a deal, and the
expected dollar amount for each deal.” Id. at 773. Plaintiffs
alleged that defendants also had access to a revenue platform
that “contained real-time information on a company-wide
level that would allow [defendants] to learn when the
company was short on its pipeline, identify deals that were
at risk, and predict outcomes early in the quarter.” Id. We
concluded that plaintiffs’ particularized allegations about the
contents of these internal reports, which contradicted
specific public statements made by defendants, were
sufficient to support a strong inference of scienter. Id.
    As discussed below, Plaintiffs’ allegations fail to raise a
strong inference of scienter against Huang. 7 I review first
the individual allegations of scienter followed by a holistic
review of the amended complaint.

7
  The majority concludes that the FAC adequately alleges scienter
against Huang but does not do so with respect to Kress. I agree with the
majority’s determination concerning Kress and therefore confine my
analysis to the FAC’s allegations relevant to Huang’s scienter.
74         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

     A. Individual Allegations of Scienter against Huang
    Plaintiffs allege that internal data showed
cryptocurrency miners purchasing significantly more
GeForce GPUs than Crypto SKUs over the class period—
approximately $1.35 billion more, according to Prysm—
which contradicted Huang’s public statements about the size
of cryptocurrency-related revenues. Plaintiffs further allege
that Huang had access to this information through various
sources: a centralized sales database, quarterly sales
meetings, daily “Top 5” emails, and GeForce Experience
data.    I address each alleged source of conflicting
information in turn.
       i. Centralized Database
     According to Plaintiffs, “Huang maintained access to a
centralized internal sales database that consolidated GeForce
sales data from around the world and identified GeForce
sales to crypto-miners.” Plaintiffs base their allegations
concerning the centralized database primarily on the
assertions of FE 1, a senior accounts manager in China who
left NVIDIA before the class period concluded. FE 1 stated
that NVIDIA tracks the sales of GPUs to device
manufacturers and to downstream consumers who purchase
the manufacturers’ completed products. FE 1 explained that
regional managers compiled this “sellout” data and entered
it into NVIDIA’s global sales database, and since 2016, the
sellout data expressly identified purchases by
cryptocurrency miners. FE 1 also stated that Huang and
Kress “had actual access to this data.”
    Where scienter allegations rely on the statements of
confidential witnesses, the complaint “must pass two hurdles
to satisfy the PSLRA pleading requirements.” Zucco, 552
F.3d at 995. “First, the confidential witnesses whose
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.           75

statements are introduced to establish scienter must be
described with sufficient particularity to establish their
reliability and personal knowledge.            Second, those
statements which are reported by confidential witnesses with
sufficient reliability and personal knowledge must
themselves be indicative of scienter.” Id. (citations omitted).
Plaintiffs’ allegations concerning FE 1 do not meet the
requirements for particularity and reliability required under
the PSLRA.
    As an initial matter, FE 1’s assertions fail to match what
Plaintiffs allege. Nowhere does FE 1 assert that the numbers
he reported from China showed that most GeForce GPUs
were sold to cryptocurrency miners. Indeed, FE 1 was part
of a team tasked with preparing the internal study which
analyzed estimated sales of GeForce GPUs to
cryptocurrency miners in China. As previously discussed,
Figure F from the study reflects that within months of the
launch of the Crypto SKU, a large majority (73%) of sales
to cryptocurrency miners was serviced by the Crypto SKU
rather than by GeForce GPU sales. See supra 57–58. This
data aligns with Huang’s public statements in August and
September 2017 that a large majority of cryptocurrency
demand was being met by the Crypto SKU. FE 1’s
statements do not contradict Figure F’s results or show how
any challenged statement contradicted what Huang knew at
the time. Finally, FE 1 does not allege that the centralized
sales database showed $1.35 billion more in global GeForce
GPU sales from cryptocurrency miners than was reported by
NVIDIA executives.
   FE 1’s statements reveal a more fundamental deficit: the
FAC does not allege that FE 1 ever personally accessed the
global sales database or had any reliable basis to know its
contents. Rather, FE 1 states that the sellout data he
76         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

submitted was curated by others at the regional level, and
then again at the global level. At best, FE 1 had firsthand
knowledge of the raw data being fed into NVIDIA’s
centralized sales database from one subregion of the
company’s global market. Contrast that with Oracle, where
multiple witnesses alleged with particularity the finalized
“hard numbers” reported in the actual database. 380 F.3d at
1231.
    Because FE 1 lacks personal knowledge of what the
global database showed, Plaintiffs’ broad assertion that
NVIDIA tracks global GeForce GPU sales to end users with
precision is not supported by particularized factual
allegations. NVIDIA executives knew that sales of Crypto
SKUs could only come from cryptocurrency miners because
the graphics functionality had been removed from those
cards, rendering them useless for gaming. Whether NVIDIA
could distinguish downstream GPU gamers or miners with
the same precision is a different matter, and NVIDIA
executives noted several times that it was “difficult to
quantify” what portion of cryptocurrency-mining demand
was met by GeForce GPU sales. Plaintiffs have not
presented any witness who personally accessed the global
sales database after the launch of the Crypto SKU and can
describe the contents of the database in sufficient detail to
support the allegation that Huang knowingly or recklessly
misrepresented cryptocurrency revenues earned in the
Gaming segment.
    Finally, Plaintiffs’ scienter allegations require Plaintiffs
to plead with particularity that Huang actually accessed this
contrary information at the time of his allegedly false or
misleading statements. FE 1 was five levels removed from
Huang and never interacted with him. The FAC does not
establish that FE 1 was in a position to know whether Huang
             E. OHMAN J:OR FONDER AB V. NVIDIA CORP.                    77

accessed the central database. Confidential witnesses who
lack personal knowledge cannot impart the particularity and
plausibility needed for a securities-fraud complaint. Quality
Sys., 865 F.3d at 1144–45.
    The only other witness who discussed Huang’s use of
this database was FE 2, a senior products director who left
NVIDIA at the start of the class period. Although FE 2 states
that he met with Huang monthly, FE 2 did not personally see
Huang access the sales database. Rather, FE 2 states he saw
a “training video” recorded before the class period that
showed Huang “looking at the sales data.” This bare
assertion falls far short of plausibly alleging that Huang “had
access to and used” information regarding cryptocurrency-
mining revenues that conflicted with his public statements.
Id. at 1145.
    FE 2’s other allegations concerning the database also fall
short of the PSLRA’s particularity and reliability
requirements. FE 2 does not state that he personally
accessed the global sales database, nor does he specifically
describe the contents of that database. And because FE 2 left
NVIDIA before the launch of the Crypto SKU, he was not
in a position to know what sales or revenue information was
contained in the centralized database following the
introduction of the Crypto SKU. 8

8
  The majority contends that Plaintiffs do rely on internal revenue
information other than Prysm’s estimates—and point to Defendants’
own challenged public statements about cryptocurrency revenues. See
Majority Op. at 43. To state the obvious, Defendants’ own revenue
statements do not establish their falsity nor raise a strong inference that
Defendants knew these statements were false when made. The majority
also claims that “[o]ther revenue information comes from witnesses FE
1 and FE 4.” There is simply no support for this assertion in the record.
78          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

      ii. Quarterly Sales Meetings
    FE 1 describes quarterly sales meetings attended by
Huang in which mining-related sales were discussed.
However, FE 1 never participated in any of those quarterly
meetings. He contends that emails were circulated from his
department before the meetings, but he does not describe
with particularity the content of any email or the substance
of any information allegedly shared at the quarterly
meetings. FE 1’s statements lack the personal knowledge
and specificity required to establish that Huang had access
to information that contradicted his public statements. See
id.
    FE 2 alleges he attended two meetings with Huang in
which Huang discussed the effect of cryptocurrency-related
demand on GeForce GPU sales and cryptocurrency miners’
preference for GeForce GPUs. FE 2 states that Huang
“reviewed everyone’s sales data in detail at these meetings,”
and described him as a “micromanager.” These statements
are not “indicative of scienter.” Zucco, 552 F.3d at 995.
Huang and Kress publicly stated that the company
introduced the Crypto SKU in response to strong
cryptocurrency-mining demand for gaming GPUs. See
supra pp. 55–62. Both also acknowledged during the class
period that cryptocurrency-mining demand continued to
affect sales of both GeForce GPUs and Crypto SKUs. For
Plaintiffs to demonstrate a strong inference of scienter, the
FAC must adequately allege that information Huang
received at the quarterly meetings contradicted his public

The FE witnesses do not disclose any revenue information contained in
the global sales database, much less whether GeForce GPU sales were
capturing the bulk of cryptocurrency revenues after the launch of the
Crypto SKU.
          E. OHMAN J:OR FONDER AB V. NVIDIA CORP.         79

statements. Because FE 2 left the company at the start of the
class period, he has no direct personal knowledge about the
impact of the Crypto SKU on cryptocurrency-mining
demand or global GPU sales. Said another way, FE 2 cannot
reliably assert that Huang was privy to information about
cryptocurrency-related revenues that conflicted with public
statements Huang made after FE 2 left the company.
    iii. Daily Top 5 Emails
     The FAC alleges that senior sales and marketing
personnel circulated weekly “Top 5” emails sharing key
achievements, challenges, market conditions, and ongoing
trends. FE 2 asserted he was on the Top 5 email distribution
list. FE 2 says Huang “made a point of telling employees
that he had ‘super user’ status in NVIDA’s IT system and
would use it to review all the Top 5 emails.” Even if FE 2’s
allegations are sufficient to establish that Huang received
these emails, the allegations do not describe any particular
email that contradicted Huang’s public statements.
     iv. GeForce Experience Data
    The “GeForce Experience” is opt-in software bundled
with GeForce GPUs to help optimize GPUs for gaming
activity. FE 1 stated that the software enabled NVIDIA “to
monitor usage of GeForce GPUs and informed it whether
those GPUs were used for gaming or mining.” This
statement is conclusory and is not supported with a
description of how the GeForce Experience software works
or how NVIDIA was able to distinguish between mining and
gaming end users. For example, the FAC does not allege
how frequently cryptocurrency miners “opted in” to a
software which is intended to enhance a gaming experience.
Nor does FE 1 profess to know whether Huang ever accessed
the GeForce Experience data himself. The FAC does not
80         E. OHMAN J:OR FONDER AB V. NVIDIA CORP.

provide the requisite particularity to establish that these
statements are based on personal knowledge or are
sufficiently reliable. See Zucco, 552 F.3d at 996.
     B. Holistic Review of Scienter Allegations
    Although none of the FAC’s allegations of scienter is
individually cogent or compelling enough to survive under
the PSLRA, we must also review the complaint as a whole
to determine 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, 551 U.S. at 324; see Zucco, 552 F.3d at 991.
    Plaintiffs’ core theory of fraud is that Defendants knew
but intentionally concealed the extent to which downstream
cryptocurrency miners were purchasing GeForce GPUs over
the proposed class period.         According to Plaintiffs,
“[l]aunching the Crypto SKU and reporting its sales in the
OEM segment . . . allowed Defendants to claim that any
mining-related revenues were cordoned off in OEM,
creating the impression that NVIDIA’s crown jewel Gaming
business was insulated from cryptocurrency volatility (and
the crash in demand that would follow the cryptocurrency
markets’ inevitable bust).” Plaintiffs’ scienter allegations
suffer from “an immediate first-level problem”: their theory
of fraud “does not make a whole lot of sense.” Nguyen v.
Endologix, Inc., 962 F.3d 405, 415 (9th Cir. 2020). Why
would Defendants launch the Crypto SKU to conceal the
extent to which the company’s GeForce GPU revenues were
dependent on cryptocurrency mining volatility if the crash in
demand was “inevitable?”
    The far more plausible inference is what NVIDIA
executives disclosed to investors throughout the class
period. NVIDIA designed and introduced the Crypto SKU
             E. OHMAN J:OR FONDER AB V. NVIDIA CORP.                    81

to address cryptocurrency-mining demand while seeking to
protect supplies of GeForce GPUs for its gaming end users.
Separating these product lines gave investors and the
company greater visibility into cryptocurrency-related
revenues, not less. As the price of Ethereum surged in late
2017, Defendants acknowledged that mining demand
continued to drive sales in both GeForce GPUs and Crypto
SKUs, though it was difficult for the company to quantify
the impact on GeForce GPU sales. Surging demand also
raised the price and limited the availability of GeForce GPUs
for downstream gamers, and NVIDIA responded by
increasing the supply of GeForce GPUs.                  Even if
cryptocurrency-mining demand drove more sales of
GeForce GPUs than Huang appreciated, such a
miscalculation, without more, does not create a claim for
securities fraud. It is far more plausible that NVIDIA
executives introduced the Crypto SKU and adjusted channel
inventory to address volatile cryptocurrency-mining demand
than it is to infer that Defendants took elaborate steps to
disguise the extent to which NVIDIA’s Gaming segment
revenues were dependent on cryptocurrency-mining
demand, knowing that a crash was “inevitable.” I would
hold that the district court did not err in dismissing Plaintiffs’
FAC for failure to sufficiently allege scienter under the
PSLRA. 9

9
  Section 20(a) of the Securities Exchange Act of 1934 makes certain
“controlling” individuals also liable for violations of section 10(b). Pub.
L. No. 73-291, 48 Stat. 899 (codified as amended at 15 U.S.C. § 78t(a));
accord Zucco, 552 F.3d at 990. As discussed above, Plaintiffs have
failed to adequately plead a primary violation of the Securities Exchange
Act. I would therefore find that Plaintiffs’ Section 20(a) claims fail as
well. See Zucco, 552 F.3d at 990.