SoftBank Profits Surge in Q3 Thanks to OpenAI Investment
SoftBank Group Corp returned to a quarterly profit, driven by investment gains from OpenAI that approached $20 billion. This marks a promising beginning for one of Masayoshi Son’s hallmark ventures, alongside ByteDance Ltd. and Alibaba Group Holding Ltd. The Tokyo-based company has invested approximately $34.6 billion in OpenAI, acquiring an 11 percent stake as of December, and has engaged in discussions to invest an additional $30 billion in a round that would value the startup at around $750 billion to $830 billion. As of December, SoftBank reported that its investment gain on OpenAI reached $19.8 billion, the company stated on Thursday. SoftBank’s investment in OpenAI is informed by its insight into the startup’s technology and business model, along with discussions with senior management, according to Yoshimitsu Goto. “We are investing in OpenAI with high conviction that the company will lead in developing AI,” he stated. Concerning additional commitments to the startup, “nothing concrete has been decided,” he stated.
OpenAI now stands as one of SoftBank’s most significant holdings, alongside a nearly 90 percent stake in chip designer Arm Holdings Plc, even as investments in other areas decelerate. The performance of the Japanese company’s shares has been closely linked to ChatGPT’s standing in comparison to competitors such as Google’s Gemini and Anthropic’s Claude. Jesse Sobelson noted that SoftBank is “the only real way to directly play OpenAI in today’s public markets,” estimating that the startup accounts for 30 per cent of SoftBank’s net asset value ahead of Thursday’s earnings. “Next OpenAI capital raise could spur re-mark of SoftBank equity ownership” and serve as a catalyst, the note stated. BTIG stated that it anticipates receiving or pursuing compensation from SoftBank for investment banking services within the next three months. In the December quarter, SoftBank disclosed a net income of ¥248.59 billion ($1.6 billion) for its fiscal third quarter, falling short of the average analyst estimate of approximately ¥857 billion. It marked the tech investor’s fourth consecutive quarterly profit — a first for SoftBank since 2021 — and occurred despite investment losses due to share price declines in Coupang Inc. “SoftBank increasingly trades on OpenAI sentiment so what the company has to say about an additional top-up in the next funding round and how that can be funded will attract interest,” said analyst Kirk Boodry. “However, concentration risk in both Arm and OpenAI remains a significant concern.”
In recent months, SoftBank has increased its investments as Son aims to take a more significant role in influencing the future of AI. In the previous month, the company finalized a $3 billion agreement to acquire private equity firm DigitalBridge Group Inc., which boasts a portfolio featuring digital infrastructure companies like AtlasEdge, DataBank, Switch, and Vantage Data Centers. Before that announcement, SoftBank acquired US chip designer Ampere Computing LLC for $6.5 billion and revealed a $5.4 billion purchase of ABB Ltd.’s robotics unit. SoftBank, which has pledged to shepherd a $500 billion Stargate push alongside OpenAI, Oracle Corp., and Abu Dhabi’s MGX to build data centers in the US, separately pursued a deal of around $50 billion for data center operator Switch; however, the talks were halted earlier this year. To finance part of the acquisition costs, SoftBank announced on Thursday that it has divested additional shares of its T-Mobile US Inc. holding and raised the amount of its margin loan secured by its mobile unit SoftBank Corp. shares to ¥1.2 trillion. The company has fully divested its Nvidia stake for $5.8 billion and has increased a margin loan by leveraging its Arm shares. While it may be premature to invest in AI technologies, Son has not yet established himself as a leader in the global surge to develop the semiconductors and other hardware necessary for artificial intelligence. Instead, a small circle of chipmakers, including Nvidia Corp. and Taiwan Semiconductor Manufacturing Co., has garnered much of the spotlight.
S&P Global Ratings cautioned last month that SoftBank’s rapidly increasing investment activities, coupled with a significant decline in the value of Arm shares at the close of the previous year, are intensifying pressure on its creditworthiness. Goto stated that SoftBank will adhere to its strategy of maintaining sufficient liquidity to cover two years’ worth of bond repayments. The company’s loan-to-value ratio was reported at 20.6 per cent, which is below the 25 per cent threshold it has set for itself, he stated. “In theory, we might be able to execute investments of considerable scale,” Goto stated. “But just because something is possible to finance doesn’t mean we should do it. As an investment company, it is our responsibility to firmly maintain financial soundness and safety.”
