SoftBank swung back to profitability in its fiscal third quarter, reporting net income of 248.6 billion yuan — roughly $1.6 billion — for the three months ending December. These numbers, as reported by the Financial Times, represent a stark reversal from the 369 billion yuan (53.4 billion USD) loss the company posted in the same quarter last year.
This turnaround of the company’s fortunes was primarily driven by a $4.2 billion gain tied to its stake in OpenAI, which is part of a broader $17 billion in gains the company says it has recorded on the ChatGPT-maker in the financial year to date — strip out that contribution and the quarter would have looked very different.
Concentration by design
SoftBank has invested more than $34 billion in OpenAI and is understood to be in talks to commit another $30 billion in a funding round that could push its valuation to $750 billion. Following OpenAI’s restructuring last year, SoftBank holds roughly 11% of the company, compared with Microsoft’s near-27% stake.
To fund this, SoftBank has aggressively reshaped its balance sheet, exiting its entire position in Nvidia for $5.8 billion and selling $12.7 billion worth of T-Mobile shares. In doing so, Masayoshi Son effectively traded SoftBank’s exposure to public, liquid assets for a private AI platform and its associated infrastructure.
The company’s Vision Fund is reflective of why Son might have been keen to do this. Split into multiple parts, Vision Fund 1 recorded a $4.1 billion loss in the quarter, dragged down by declines in publicly-traded holdings like Coupang, which suffered a significant data breach. Meanwhile, Vision Fund 2, which includes OpenAI, generated a $6.6 billion gain, more than offsetting those losses.
The older portfolio, heavy with late-stage tech companies that are now exposed to public market volatility, is under serious pressure while the newer fund, anchored by OpenAI, is delivering gains at a scale large enough to dominate consolidated earnings. In effect, SoftBank’s quarterly performance is now increasingly tied to how OpenAI is valued.
Growing hardware strategy
(Image credit: Graphcore)
In addition to its heavy investment in OpenAI, SoftBank also retains a majority position in Arm, whose CPU architectures underpin much of the world’s mobile computing and an expanding share of the server silicon market. Arm is also known to be interested in manufacturing its own chips.
... continue reading