Surprise move: SoftBank sells entire stake in NVIDIA for $5.8B
What's the story
SoftBank Group has sold its entire stake in NVIDIA Corporation for a whopping $5.8 billion. The Tokyo-based company had invested around $3 billion in NVIDIA by the end of March. The sale comes as part of founder Masayoshi Son's strategy to invest heavily in artificial intelligence (AI) and build his own ecosystem around it.
Performance
SoftBank reports surprise net income
The sale of the NVIDIA stake, along with a windfall at its Vision Fund start-up investment unit, helped SoftBank report a surprise net income of ¥2.5 trillion ($16.2 billion) in its fiscal second quarter. This was way above analysts' estimates of ¥418.2 billion on average. Today, SoftBank also announced a 4-for-1 stock split effective January 1 next year as part of its future plans under Son's leadership.
Investment strategy
Portfolio includes AI giants
Under Son's leadership, SoftBank has built a portfolio that includes some of the most sought-after names in AI, such as OpenAI and Oracle Corporation. These investments have boosted SoftBank's paper gains and led to a 78% surge in its share price over the three months ending September, its best performance since Q4 2005. Citigroup analyst Keiichi Yoneshima raised his target price for SoftBank's stock to ¥27,100 based on OpenAI's valuation.
Growth plans
Son's aggressive pursuit of AI, chips
Son, 68, is aggressively pursuing investments in AI and chips while scaling back other investments. His ambition has led to projects like the Stargate data center rollout and a proposed $30 billion investment in OpenAI. Son is also in talks with Taiwan Semiconductor Manufacturing Company (TSMC) for a $1 trillion AI manufacturing hub in Arizona. Earlier this year, SoftBank even considered acquiring US chipmaker Marvell Technology.
Financial strategy
Balancing act for SoftBank ahead
The challenge for SoftBank will be to balance the financing for its new investments, including some $20 billion for OpenAI, and $6.5 billion for the planned acquisition of chip designer Ampere Computing LLC. Concerns remain over high valuations supporting AI firms and their capital spending, as well as who would benefit from large data centers and other infrastructure being built.