SoftBank Swings to Profit on Valuation Boost From OpenAI Bet

(Bloomberg) — SoftBank Group Corp. sprang back to a quarterly profit after investment gains from OpenAI neared $20 billion, a promising start for one of Masayoshi Son’s signature gambles alongside ByteDance Ltd. and Alibaba Group Holding Ltd.

The Tokyo-based company has invested about $34.6 billion in OpenAI, accumulating an 11% stake as of December, and has been in talks to invest as much as $30 billion more in a round that would value the startup at about $750 billion to $830 billion. As of December, SoftBank’s investment gain on OpenAI stood at an estimated $19.8 billion, the company said Thursday.

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SoftBank’s bet in OpenAI is based on its visibility into the startup’s technology and business model, as well as communication with top management, SoftBank Chief Financial Officer Yoshimitsu Goto said.

“We are investing in OpenAI with high conviction that the company will lead in developing AI,” he said. Regarding further commitments to the startup, “nothing concrete has been decided,” he said.

OpenAI now represents one of SoftBank’s biggest holdings, alongside a roughly 90% stake in chip designer Arm Holdings Plc, even as investments elsewhere slow. That’s tethered the Japanese company’s shares to ChatGPT’s relative performance against rivals Google’s Gemini and Anthropic’s Claude.

SoftBank is “the only real way to directly play OpenAI in today’s public markets,” BTIG analyst Jesse Sobelson wrote in a note ahead of Thursday’s earnings, estimating that the startup represents 30% of SoftBank’s net asset value. “Next OpenAI capital raise could spur re-mark of SoftBank equity ownership” and serve as a catalyst, the note said. BTIG said it expects to receive or seek compensation from SoftBank for investment banking services in the next three months.

For the December quarter, SoftBank reported a net income of ¥248.59 billion ($1.6 billion) in its fiscal third quarter, compared with the average analyst estimate of about ¥857 billion. It was the tech investor’s fourth straight quarterly profit — a first for SoftBank since 2021 — and came despite investment losses on share price drops in Coupang Inc.

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SoftBank Group is on track for its second most profitable year after it reported 3Q net income of ¥248.59 billion ($1.6 billion) compared with consensus’ ¥857 billion, aided by OpenAI valuation gains, though they were slightly weaker than expected due to a lower carry value. The company is expected to invest more in AI after raising a further ¥1 trillion in the quarter through a ¥558 billion ($3.6 billion) T-Mobile share sale and ¥400 billion of loans tied to SoftBank Corp. shares.