SoftBank performance strengthens credibility of its AI vision

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SoftBank Group wants to build a happier future for all through artificial intelligence technologies. The Japanese tech investor has just posted its biggest quarterly profit in two years. That, combined with founder Masayoshi Son’s restraint in making risky investments in recent years, gives Son the cash and credibility to make a big bet on the next AI breakthrough.

SoftBank reported net income of ¥1.18tn ($7.7bn) for the latest quarter, higher than expected and a sharp turnaround from a net loss of ¥931bn last year. The Vision Fund reported a gain of ¥373bn thanks to the rising value of investments in China and India. 

India’s equity markets have played a significant role in the fund’s gains. Indian stocks staged a record rally this year and are still hovering near their highs. A frenzy in the local IPO market has helped SoftBank, with companies in its portfolio including e-scooter maker Ola Electric Mobility and online retailer Brainbees Solutions listing this year. Food-delivery app Swiggy’s $1.3bn IPO, which will start trading this month, was subscribed more than three times, and should add a further boost for the current quarter.

The turnaround for the Vision Fund should be welcome news for concerned investors. It comes after two straight years of large losses and a soft fiscal 2023 as valuations of start-ups in its portfolios plunged. That helps justify the surge in SoftBank shares, which are up nearly two-thirds in the past year.

Critics have long questioned the company’s haphazard investment choices. Its bets have ranged from hotel chains to co-working office company WeWork — a far cry from its AI ambitions.

The good news is that SoftBank and the Vision Fund have been more focused on investments with a generative AI theme in recent quarters. These include a $500mn investment in OpenAI which closed in September. Chip designer Arm, which SoftBank owns about 90 per cent of, has benefited from the AI boom, with shares doubling this year. Arm accounts for about half the total equity value of SoftBank’s holdings. Meanwhile, a strong dollar has also helped boost earnings for SoftBank with a large chunk of its investments in US dollars.

For now, excitement around AI infrastructure in particular remains strong, with AI spending in the US expected to reach $336bn in 2028, according to market research firm IDC. SoftBank may not be able to build a happier future for everyone. But if Son were to find the next big winner, he would at least ensure the happiness of his shareholders.