SoftBank posts $1.6B quarterly profit as OpenAI bet pays off
What's the story
Japan's SoftBank Group has reported a net profit of 248.6 billion yen ($1.62 billion) for the October-December quarter, its fourth consecutive quarterly profit. The result is a stark contrast to the net loss of 369 billion yen during the same period last year. The company's financial performance has been significantly boosted by the rising valuation of its investment in OpenAI, the creator of ChatGPT.
Investment gains
OpenAI boosts SoftBank's financials
In the nine months leading up to December, OpenAI has given SoftBank a massive investment gain of 2.8 trillion yen. Billionaire Masayoshi Son's conglomerate has invested over $30 billion in the company, acquiring an 11% stake. This "all-in" bet is part of SoftBank's strategy to win the race among developers of large language models (LLMs).
Capital raise
OpenAI seeks $100 billion capital raise
OpenAI is said to be looking for another $100 billion capital raise, with SoftBank, Amazon, and NVIDIA as potential investors at an even higher valuation of $830 billion. To fund its investments, the tech investment group has resorted to asset sales, bond issuance, and loans secured by other holdings like chip designer Arm.
Financial impact
Concerns over SoftBank's exposure to OpenAI
SoftBank's heavy exposure to OpenAI has led many to see it as a publicly traded proxy for the US firm, raising investor concerns about its financial impact. The group has already sold its $5.8 billion stake in NVIDIA and part of its T-Mobile stake for $12.73 billion between June and December last year.
Borrowing boost
SoftBank increases borrowing limit amid rising AI competition costs
SoftBank has also increased its borrowing limit against shares in its domestic telecoms unit, SoftBank Corp., to 1.2 trillion yen from 800 billion yen. The move comes as OpenAI faces rising costs to train and run its AI models amid stiff competition from Alphabet and others. SoftBank's shares rose by 2.4% in a flat market before the earnings announcement.