SoftBank Group has divested its entire stake in Nvidia, realising a substantial $5.8 billion profit. This strategic move comes as the Japanese conglomerate, under the leadership of founder Masayoshi Son, intensifies its focus on building a comprehensive artificial intelligence ecosystem. The significant gains from the Nvidia sale, coupled with strong performance from its Vision Fund, propelled SoftBank to a surprising ¥2.5 trillion ($16.2 billion) net income for the fiscal second quarter, far surpassing analyst projections.
Key Takeaways
SoftBank has sold its complete Nvidia holding, securing a $5.8 billion profit.
The company is significantly increasing its investments in artificial intelligence.
SoftBank reported a ¥2.5 trillion net income for the fiscal second quarter.
A 4-for-1 stock split is planned for January 1 to attract more retail investors.
Strategic Pivot to AI
Masayoshi Son is positioning SoftBank at the forefront of the AI revolution. The company has made substantial investments in key AI players such as OpenAI and Oracle Corp., both of which have experienced increased demand driven by AI adoption in enterprises. These strategic holdings have contributed to a remarkable 78% surge in SoftBank's shares in the three months leading up to September, marking its most significant performance since 2005.
Future Investments and Challenges
Son's ambitious plans include a $30 billion commitment to OpenAI, a $20 billion initiative named Stargate focused on AI data centres, and discussions with TSMC regarding a potential $1 trillion AI manufacturing hub in Arizona. SoftBank is also exploring acquisitions, including Marvell Technology, and plans to spend $6.5 billion on acquiring Ampere Computing. However, the immense scale of these ventures presents significant financing challenges and risks associated with managing exposure to highly valued AI companies. Analysts caution that SoftBank's recent share price rally may have already factored in much of the anticipated growth.
Nvidia's Dominance and Market Outlook
Nvidia remains a central figure in the AI landscape, with its upcoming Q3 earnings report anticipated as a barometer for the global AI industry's health. Despite growing investor skepticism, CEO Jensen Huang maintains that AI is not a speculative bubble akin to the dot-com era. Nvidia has reportedly secured $500 billion in AI chip orders for the next five quarters, underscoring its market dominance. With a market capitalisation exceeding $4.83 trillion, Nvidia's valuation is substantial. The company continues to exhibit rapid growth, with its fiscal second-quarter revenue climbing 56% year-on-year to $46.7 billion, largely driven by its data centre business and the sale of AI chips like Blackwell. Its impressive gross margin of 72% is attributed to its proprietary CUDA ecosystem.
Emerging Risks in the AI Sector
Despite Nvidia's strong performance, risks are accumulating. Major technology firms have invested heavily in AI hardware, primarily from Nvidia. A slowdown in the generative AI wave or a failure to demonstrate profitability could lead to a sharp reduction in such spending. Studies indicate that a significant percentage of AI projects fail to deliver value, and some AI companies are incurring substantial operational costs. While Nvidia is recognised as a growth powerhouse, the stretched valuations and uncertainties surrounding AI returns suggest a need for caution among investors.