SoftBank Surpasses Toyota as Japan’s Top Company in AI Surge
SoftBank Group Corp. surpassed Toyota Motor Corp. as Japan’s most valuable company on Monday, signifying a pivotal moment in the global artificial intelligence surge and a significant reordering of the nation’s corporate landscape. Shares of the Masayoshi Son-led technology group experienced a 14 per cent increase during trading in Tokyo, resulting in its market capitalisation surpassing that of Toyota for the first time in over twenty years. The accomplishment was last realised only momentarily during the zenith of Japan’s internet bubble in 2000, as measured by market value inclusive of treasury shares. The rally has propelled SoftBank shares up more than 90 per cent this year, pushing the company’s market value above 48 trillion yen, exceeding Toyota’s approximately 46 trillion yen. Toyota shares, in contrast, have experienced a decline exceeding 10 percent this year. The changing of the guard underscores the rapid shift in investor preferences toward companies that are capitalising on the AI buildout. It also reflects the divergence in fortunes between two Japanese corporate titans, as macroeconomic headwinds and geopolitical tensions exert pressure on the auto sector, while enthusiasm for AI gains momentum. “This epoch-making event symbolises the AI boom,” said Kazuhiro Sasaki. “Extraordinary conditions are emerging around expectations for massive IPOs in the US,” triggering a reshuffle of capital, he said.
Japan’s memory-chip manufacturer Kioxia Holdings Corp. currently has a market capitalisation of approximately 40 trillion yen, positioning it as the third-most valuable company in Japan, ahead of Mitsubishi UFJ Financial Group Inc. The supplier of NAND flash chips anticipates higher earnings in the current quarter compared to the 12 months ending in March, driven by the substantial demand for data storage from AI data centers. SoftBank experienced an increase on Monday, driven by gains in AI-related companies throughout the region, positioning it as the most significant contributor to the Topix index. In contrast, Toyota emerged as the benchmark’s largest detractor. The company over the weekend announced plans to invest as much as $87 billion to build AI data centers in France, fuelling optimism about increasing demand for AI infrastructure. SoftBank’s stock has been on an upward trajectory since the announcement last month regarding two prominent portfolio companies – OpenAI and SB Energy Corp. – that are gearing up for possible US listings. SoftBank has pledged nearly $65 billion to the developer of ChatGPT, resulting in an approximate 13 percent stake by October.
Investor sentiment toward SoftBank has shifted, alleviating previous worries that growing competition from rivals such as Anthropic PBC, Alphabet Inc.’s Google, and Elon Musk’s xAI Corp. could undermine OpenAI’s leading position. The company’s valuation has been further bolstered by advancements in its chip-design unit, Arm Holdings Plc, in light of Nvidia Corp.’s earnings results and an increasing belief that demand for AI will persist across various sectors. Excluding treasury shares, SoftBank’s market capitalisation had already exceeded that of Toyota’s last month. In Japan, it is customary for market capitalisation to encompass treasury shares, a practice that contrasts with the approach taken in the US. However, analysts frequently exclude these shares when making global comparisons. In contrast, Toyota shares have declined this year, reflecting a retreat in the face of a deteriorating macroeconomic environment. Hostilities associated with the Iran conflict have resulted in an increase in oil prices, subsequently elevating fuel costs and suppressing demand for automobiles.
The automotive sector’s growth continues to face significant pressure as the industry undergoes a challenging and capital-intensive structural transition toward electric vehicles, coupled with the complexities of software integration. “SoftBank has concentrated its management resources on AI-related businesses and has successfully ridden the broader global tech rally,” stated Tomo Kinoshita. Toyota, meanwhile, faces challenges due to increasing oil prices resulting from the Iran war, which elevates the cost of vehicle operation and exerts pressure on global auto demand. While Kinoshita indicated that the valuation gap could reverse later this year if crude prices decline and bolster automotive demand, the long-term trajectory appears to favour technology. “Over the longer term, AI-related companies are likely to command higher valuations,” stated Kinoshita. “Their presence in Japan’s equity market will only continue to grow stronger.”
