SoftBank, the Japanese conglomerate, has surprised the market with a net loss of 477.6 billion yen ($3.3 billion) in the second quarter, contrary to analysts’ expectations of a profit. The loss can be attributed to declines in the share prices of Alibaba, Deutsche Telekom, and T-Mobile, leading to losses on SoftBank’s investments. Despite this setback, SoftBank’s flagship SoftBank Vision Fund (SVF) has turned the tide, posting gains of 159.8 billion yen ($1.1 billion). These gains are mainly associated with SVF’s investments, particularly in subsidiaries like the UK chipmaker Arm.
The investment in Arm is particularly exciting for SoftBank, as the company prepares for its initial public offering (IPO). Arm’s IPO holds immense promise, especially amidst the surging demand for artificial intelligence (AI) chips. The soaring valuation of Arm’s listed rival, Nvidia, reaching the $1 trillion mark, further bolsters SoftBank’s confidence in the potential of AI-related investments. However, not all of SoftBank’s AI startups have been successful, evidenced by SVF’s investment in SenseTime, a Chinese AI firm that saw its shares plummet by over 57% last year. Should the AI hype fail to meet expectations, even the much-anticipated Arm IPO may face challenges.
SoftBank’s performance in the April-June quarter is estimated to result in a net profit of 75 billion yen ($525 million), according to Refinitiv analysts. This is a significant improvement compared to the previous quarter when SoftBank reported a loss of $7.18 billion. The fair value of SoftBank’s listed portfolio and private portfolio companies also increased in the current quarter.
One notable development is SoftBank’s plan to raise $10 billion through Arm’s IPO. The chipmaker was acquired by SoftBank in 2016 for $32 billion and is now expected to be valued at $60-70 billion. The IPO, which may occur as soon as September, will allow SoftBank to repurchase shares and tender for bonds while maintaining the capacity for further investments.
Despite SoftBank’s losses and failures in the AI sector, Masayoshi Son, SoftBank’s chief, remains optimistic and views the setbacks as learning opportunities. Reflecting on his AI investments, Son admitted to making mistakes but emphasized the numerous budding opportunities that he believes will blossom soon.
It is worth mentioning that SoftBank recently sold a portion of its Alibaba stake, leading to a halving of its loss from the previous year. Masayoshi Son is also stepping down from Alibaba’s board, marking his departure from SoftBank’s most successful investment.
Although SoftBank’s recent net loss was unexpected, the gains made by its Vision Fund and the promising prospects of Arm’s IPO highlight the company’s resilience in the face of challenges. Despite setbacks in certain AI investments, SoftBank remains committed to exploring the vast potential of generative AI and continuing its mission to transform the tech industry.
