SoftBank Group Corp. sold its entire stake in Nvidia Corp., pocketing $5.8 billion ahead of a rash of planned investments by founder Masayoshi Son to build his own sphere of influence supporting artificial intelligence.
The Tokyo-based company had raised its stake in Nvidia to about $3 billion by the end of March. That stake and a windfall at Vision Fund helped SoftBank report a surprise net income of ¥2.5 trillion ($16.2 billion) in its fiscal second quarter, far outrunning the average of analyst estimates of ¥418.2 billion.
On Tuesday, SoftBank also announced a 4-for-1 stock split for 1 January.
SoftBank now boasts a portfolio that includes some of the world’s most sought-after AI companies: OpenAI and Oracle Corp. Those stakes boosted its paper gains and helped drive a 78% surge in share price over the three months ending in September—its best such performance since the December 2005.
The number of bets from which SoftBank is successfully recouping investment has increased, “so we raise our forecasts”, Citigroup analyst Keiichi Yoneshima wrote in a note ahead of the earnings release. The analyst set his target price for SoftBank’s stock at ¥27,100, linking calculations with OpenAI’s valuation and assuming a future valuation range of $500 billion to $1 trillion for the ChatGPT operator.
Son, 68, is aggressively seeking to capitalise on booming investment in AI and chips, even as he scales back other investments.
The SoftBank founder’s ambition has fueled initiatives including the Stargate AI data centre rollout and a planned $30 billion investment in OpenAI. Son is also courting Taiwan Semiconductor Manufacturing Co. Ltd. and others about taking part in a $1-trillion AI manufacturing hub in Arizona. SoftBank even explored a takeover of US chipmaker Marvell Technology Inc. earlier this year.
The challenge will be to balance the financing behind the new investments, including roughly $20 billion for OpenAI and $6.5 billion for the planned acquisition of chip designer Ampere Computing LLC. Concerns also persist about the high valuations propping up AI firms and their capital spending, and who will ultimately benefit from the big data centres and other infrastructure under construction.
“The simple trade was to buy SoftBank for cheap exposure to Arm shares and a broader AI and tech mix. That idea has more than delivered—the stock’s more than doubled, far outpacing the modest rise in NAV,” according to a Finimize Research note published on Smartkarma ahead of the earnings release, referring to SoftBank’s net asset value.
“But now the discount is mostly closed, so SoftBank is not a ‘cheap’ way in anymore. So on that basis, it’s likely a good time to sell and take your profits.”