SoftBank Returns to Health as Silicon Valley and Chip Investments Prosper

Technology investor’s shares rise 11% on the back of higher revenue at its chip-design subsidiary


[ABS News Service/08.02.2024]

Technology investor SoftBank Group reported its first profit in more than a year during the October-December quarter, helped by a revival in Silicon Valley that drove up the value of SoftBank’s portfolio.

SoftBank posted a net profit of 950 billion yen, equivalent to $6.4 billion, for the three months ended Dec. 31, marking its first quarterly profit after four consecutive quarters of losses. It had lost nearly that much in the same period a year earlier.

SoftBank’s net asset value, which the company has identified as a favored barometer of its performance, increased in each quarter of 2023 to end the year at ¥19.2 trillion, equivalent to $129 billion at the current exchange rate.

“We are experiencing a dynamic shift in our portfolio,” said SoftBank’s chief financial officer, Yoshimitsu Goto. He said SoftBank’s chip-design unit,

Arm Holdings, accounted for nearly a third of the group’s assets while investments in its tech-focused Vision Funds made up 38%. Its stake in Chinese internet company Alibaba, which made up half of SoftBank Group’s assets at the end of 2019, has been reduced to virtually zero.

Goto said the change reflected SoftBank’s move to lower exposure to China and its focus on artificial intelligence.

Profit in the latest quarter was partly driven by gains in the Vision Funds segment consisting of the SoftBank Vision Fund 1, which ended new investments in 2019, as well as SoftBank Vision Fund 2 and Latin American funds. The Vision Funds recorded a $4 billion investment gain in the quarter.

Technology shares have regained ground recently as inflation shows signs of moderating globally and the Federal Reserve has suggested it is done with interest-rate increases.

SoftBank Group shares closed up more than 11% in Tokyo trading on Thursday, which ended before the results were announced. That followed an after-hours surge in shares of Arm Holdings, which went public in the U.S. last year.

Arm on Wednesday projected $850 million to $900 million of sales in the three months ending in March, higher than analyst forecasts.

“Arm is the company that can contribute the most to AI, which is the biggest theme in the world,” Goto said. He declined to say whether SoftBank planned further sales of Arm shares, but he said the group could make use of the shares in raising funds.

SoftBank Group said in September that it kept a roughly 90% stake in Arm after the initial public offering. The share price of Arm has surged since the IPO amid global enthusiasm for semiconductor shares, especially those connected to AI applications.

Among strong performers in SoftBank’s portfolio, Goto cited TikTok owner ByteDance, which is part of the Vision Fund 1. Goto said Vision Fund 2 was focusing on smaller AI deals such as an investment in Tractable, a London-based company that is working on AI-powered automation of insurance claims and damage assessments.

The Vision Funds unit invested $100 million during the October-December quarter, less than the previous quarter, but Goto said there was no change in the company’s stance of more actively looking for investment opportunities after years of playing defense.

SoftBank Chief Executive Masayoshi Son, formerly a regular presenter at the company’s quarterly earnings meetings, again stayed out of the spotlight Thursday. He has said he wants to focus on Arm’s business and innovations in artificial intelligence.