SoftBank falls to $2.4bn loss amid plans for huge AI investments

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SoftBank tumbled to a $2.4bn loss in its fiscal third quarter as the Japanese conglomerate and its founder Masayoshi Son gear up to finance one of the world’s largest-ever bets on artificial intelligence.

The tech group said on Wednesday it fell to a loss of ¥369.2bn ($2.4bn), compared with a gain of ¥950bn in the same quarter last year and missing analysts’ forecasts for a net profit of ¥234bn, according to LSEG data. 

SoftBank was hit by a ¥352.7bn loss in its tech-heavy investment vehicles, the Vision Funds, following two successive quarters of gains.

“It looks like the biggest change is that they had some losses in their private portfolio, in the Vision Funds, which they don’t break out, but quarter to quarter it’s not clear the number matters that much,” said Kirk Boodry at Astris Advisory in Tokyo.

The often volatile Vision Funds were also hit by drops in the valuation of some of their higher profile public companies, including South Korean ecommerce group Coupang and Chinese ride-hailing group Didi.

“However, what everyone wants to know is what they are going to do with AI, what is happening with Stargate, and how they are going to fund it,” Boodry added.

Son is on the hook to help finance a massive US AI infrastructure project dubbed “Stargate”, announced last month as a partnership with Sam Altman’s OpenAI, as well as other groups including Oracle, Microsoft and Nvidia.

The Japanese group plans to put about $15bn to $20bn into Stargate initially, say people familiar with the matter, with spending of as much as $500bn expected on the project over the next four years.

Chief financial officer Yoshimitsu Goto said on Wednesday that Stargate would be funded mainly through “project financing”, with billions to be raised in loans from global investors taking on various levels of risk and SoftBank investing in exchange for an equity stake in the businesses, alongside OpenAI, Oracle and Abu Dhabi state fund MGX.

“We would like to start by deploying $100bn,” said Goto. “We want to work project by project . . . we have to bear the equity portion . . . which could, for example, be 10 to 20 per cent [of the total].” 

The company is targeting the first Stargate project for execution in this fiscal year, he added.

The company’s cash position hit ¥5tn, or $33bn, at the end of December, Goto said.

SoftBank is also set to invest between $15bn and $25bn in OpenAI as the centrepiece of a wider funding round that could lead to ChatGPT’s creator raising as much as $40bn. OpenAI, with new money from the SoftBank round, is expected to match whatever figure the Japanese group puts into the infrastructure project.

The investments are all part of Son’s search for a central role in AI and what he considers humanity’s next phase. His ambitions run from power generation to robots and data centres, and he still believes the chip designer SoftBank owns, Arm, can produce its own AI chips, say people familiar with his thinking.