SoftBank Unveils $3.4 Billion Buyback Ahead Of Next Big AI Bet
SoftBank Group Corp. announced a buyback worth up to ¥500 billion ($3.4 billion), following a month of sharp selloffs that have trimmed much of the technology investor’s gains this year.
(Bloomberg) -- SoftBank Group Corp. announced a buyback worth up to ¥500 billion ($3.4 billion), following a month of sharp selloffs that have trimmed much of the technology investor’s gains this year.
The Tokyo-based company also reported a smaller quarterly loss of ¥174.28 billion, compared with a loss of ¥477.62 billion a year ago. as solid earnings at chip unit Arm Holdings Plc helped counter continued losses on Vision Fund assets.
The buyback and results announcement come as founder Masayoshi Son has indicated he’s mobilizing resources for a large-scale investment push into AI. The numbers also coincide with a correction in the markets as investors reevaluate how they price AI’s potential impact on earnings. SoftBank’s stock plunged Monday by its most since 1998. The shares recouped much of that loss on Tuesday and Wednesday, but SoftBank’s market value was still down roughly $40 billion from a record high notched in July.
SoftBank remains saddled with hundreds of loss-making startups that remain on its flagship Vision Fund’s books. The majority of that portfolio comprises unlisted young companies, which are seeking to navigate a swiftly transforming tech landscape.
The holding company, which owns big stakes in Japan’s No. 3 mobile carrier as well as chip designer Arm, has a large cash pile to deploy. The company’s ability to raise further financing has soared thanks to Arm’s initial public offering last year, while earnings got a further boost from another sale of T-Mobile US Inc. shares to Deutsche Telekom AG as part of a 2020 deal.
Prior to the market turmoil of recent weeks, Son said he’s ready to swing for the fences. The billionaire is working on a plan to deploy some $100 billion into AI-related chips, Bloomberg reported in February. Last month, the company bought British semiconductor startup Graphcore Ltd. for an undisclosed sum. The Bristol-based startup designs semiconductors to run AI programs, but has struggled to gain traction, even as far larger rival Nvidia Corp. surged ahead.
SoftBank may make significant investments in the future to boost its scale and promote collaboration with Arm, said Citigroup analyst Mitsunobu Tsuruo, prior to the earnings report. “SoftBank has just begun investing in AI semiconductors,” he said.
Son is increasingly making investments through the SoftBank holding company rather than through the Vision Fund he set up seven years ago. Over the last few quarters, the Vision Fund has been selling down its assets while slowing its pace of investments. Instead, its team is increasingly advising the holding company of potential targets.
What Bloomberg Intelligence Says:
SoftBank’s risk-on investment approach is taking center stage, which could lead to a more volatile earnings pattern going forward. Seeking increasing exposure to hardware and energy-related infrastructure that are critical for AI development might be costly, while returns of these projects could be cyclical or have a long payback period. In the meantime, the company’s profit might wobble at breakeven levels, as contribution from Arm and SoftBank Corp. could be offset by the volatile Vision Funds’ performance. Vision Funds’ net investment divestiture in recent quarters and its 30% downsizing of staff last year imply that the group might deploy more of its own cash for AI investments. This explains management’s comment on the absence of plans for immediate share buybacks despite pressure from activist investor Elliott.
Marvin Lo and Chris Muckensturm
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