SoftBank’s AI Bets Can’t Offset Big Company Loss

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Even the AI hype train can’t move SoftBank out of the red.

On Tuesday, the Japanese conglomerate which used to bankroll Silicon Valley announced a quarterly loss of 477.6 billion yen ($3.3 billion). That came as a shock to Wall Street, which had been expecting a profit of around 75 billion yen ($520 million) partly due to CEO Masayoshi Son plowing investment into anything that has ‘AI’ in the name.

The Son Also Rises

SoftBank rose to glory off the back of its Vision Fund investing, which backed tech darlings including Uber. Unfortunately, some of those starlets, like WeWork, suffered pretty spectacular falls from grace, and for the last five quarters the fund has been a money-loser as high inflation has harshed tech’s growth-obsessed mellow. Not a great look, especially considering Son owes SoftBank $5 billion.

In June, however, Son said the Vision Fund would boldly follow the pack and go all in on AI. He termed the splurge on AI a tech “counter-offensive,” but Tuesday’s results suggest heavy casualties:

  • The Vision Fund notched its first gain in five quarters with 159.8 billion yen ($1.1 billion), but the total still wasn’t enough to eclipse the company’s overall losses.
  • SoftBank CFO Yoshimitsu Goto said on the company’s earnings call that it hasn’t been plunging head-first into new investments, but spacing them out as it was seeing the market recover — but only slowly. “Based on this trend we also like to make a good balance between gas and brakes for resuming investment activities,” he said, per CNBC.

Arm’s Length: SoftBank may soon have a windfall coming its way, as Nikkei Asia reported on Tuesday that the long-awaited IPO for chipmaker Arm (which SoftBank originally tried to sell then backed off in the face of regulatory heat) could come as soon as September, with Apple and Samsung poised to invest. Goto did not comment on the earnings call on when to expect the IPO, but said it would contribute “a lot” to the Vision Fund. Is “a lot” a lot? Depends on the context…