SoftBank’s Q2 Profit Soars as Tech Investments Payoff
Leading Japanese Bank, SoftBank has reported a $7.7 billion profit in quarter 2 earnings from its Vision Fund Tech arm. CNBC reported that SoftBank’s Q2 profit soared after the financial giant swung back to profitability in the three months ended September 2024.
SoftBank’s Vision Funds unit reported a ¥373.14 billion profit, up from a ¥258.86 billion loss it recorded a year ago.
Profitability Drivers
The financial giant attributed its rebound to profitability to share price gains it made through a range of investments. These investments include stakes in China’s ride-hailing startup DiDi Global, e-commerce firm Coupang, and T-Mobile in the US.
SoftBank profit margins were also boosted by the increased value of investments in TikTok’s parent company, Bytedance. SoftBank’s Vision Fund 2 suffered a ¥232.6 billion loss following a drop in share prices of companies such as Norwegian Robotics company, AutoStore, and US-based automation firm, Symbotic. SoftBank said the strong Q2 earnings boost its financial footing and enable it to selectively make big investments at the appropriate time.
“We are preparing to take advantage of various opportunities,” SoftBank Group’s CFO Yoshimitsu Goto said.
Betting on AI
SoftBank is already riding the AI boom by making strategic investments in AI startups. Through its Vision Fund 2, the banking institution invested an estimated $500 million in OpenAI in a recent funding round where the AI startup raised $6.6 billion. Although this investment seems modest, SoftBank considers it significant in building its relationship with OpenAI.
Last month, the bank expressed confidence in AI with its CEO Masayoshi Son exuding confidence that artificial general intelligence will be achieved within two to three years. After adopting a defensive strategy for about a year, SoftBank has started to make more aggressive investments in tech. In recent weeks, tech stocks have gained significantly due to AI enthusiasm.
On November 6, 2024, Nvidia toppled Apple to become the world’s most valuable company. Buoyed by the Nvidia AI wave, the giant AI chip maker’s stocks surged by 3% on November 5, 2024, to close the day with a $3.43 trillion market capitalization against Apple’s $3.4 trillion.
Reposition Tech Investment
SoftBank’s Vision fund investment growth in smartphone chip maker Arm Holdings has been yielding results for the banking firm. SoftBank holds a 90% stake in Arm Holdings. Last week, Arm Holdings reported a $107 million net profit for quarter 3 compared to a loss a year ago.
The company’s profitability was driven by sales from complex chips that are required to support AI applications.
SoftBank’s stake in Arm now constitutes a big chunk of its investment portfolio after the company reduced its focus in China and sold off its stake in Alibaba Group Holding. In recent years, the financial giant has had its share of controversial investments, which include companies whose valuations have dipped sharply and others that have collapsed.
CEO Son says that SoftBank is now repositioning itself at the heart of the AI boom as demand for AI chips and data center GPUS continues to soar.
This year alone, SoftBank’s share prices have increased by 50%. This gain is attributed to the growing enthusiasm around demand for AI products in the company it has invested in, including Arm Holdings.
