SoftBank reports a $1.6 billion quarterly profit for the fourth consecutive quarter due to OpenAI benefits
Japan’s SoftBank Group reported a net profit of 248.6
billion yen ($1.62 billion) for the October–December quarter, helped mainly
by a higher valuation of its investment in OpenAI, the company behind ChatGPT.
This marks SoftBank’s fourth straight profitable quarter.
During the same quarter last year, SoftBank had reported a net
loss of 369 billion yen, so the latest results show a strong turnaround.
SoftBank’s earnings were supported by the rising paper value
of its OpenAI stake. Over the nine months ending in December, SoftBank recorded
an investment gain of about 2.8 trillion yen from OpenAI. The group has
invested more than $30 billion in OpenAI and now owns roughly 11%
of the company. Founder Masayoshi Son has made a large, focused bet that OpenAI
will be a long-term winner in the global AI race.
Analysts had widely different expectations for the quarter,
with forecasts ranging from a large profit to a loss, showing uncertainty
around SoftBank’s volatile investment-driven earnings.
Reports say OpenAI is seeking another $100 billion in
funding at a possible valuation of around $830 billion, with
SoftBank, Amazon, and Nvidia considered potential investors.
How SoftBank is funding its AI bets
To support its heavy AI investments, SoftBank has been
raising cash through:
- Asset
sales
- Bond
issues
- Large
loans backed by its shareholdings
It has:
- Sold
its $5.8 billion stake in Nvidia
- Sold
part of its T-Mobile stake for $12.73 billion between June and
December
- Increased
a margin loan backed by its Arm shares to $20 billion (from $13.5
billion) and fully used that capacity
- Raised
the borrowing limit against shares of SoftBank Corp (its telecom unit) to 1.2
trillion yen from 800 billion yen
Because of its large OpenAI stake, investors increasingly
see SoftBank as a stock market proxy for OpenAI, which has raised
concerns about concentration risk if OpenAI’s value falls.
While OpenAI has been viewed as a leader in large language
models, it faces rising costs to train and operate AI systems and growing
competition from companies such as Google’s parent Alphabet and others.
SoftBank shares closed up 2.4% before the earnings
announcement, in an otherwise flat market.
