By Anton Bridge
TOKYO (Reuters) -Japan's SoftBank (TYO:9984) Group booked a surprise $2.4 billion quarterly loss on Wednesday, hit by a decline in the value of e-commerce platform Coupang and other tech companies held by its Vision Fund investment arm.
The result is likely to raise more questions about how founder Masayoshi Son aims to fund one of the tech investment giant's most ambitious undertakings yet - a series of huge bets on artificial intelligence.
These reportedly involve tens of billions of dollars to be invested in Sam Altman's Microsoft-backed OpenAI, the Stargate project - to build AI infrastructure in the United States - and Cristal, a joint venture with OpenAI to develop AI services in Japan for corporate customers.
While Son's deep-pocketed pledges mark a return to the aggressive SoftBank of old, so did Wednesday's loss. SoftBank rocked the technology investment world by taking big stakes in startups through its Vision Funds. While some of those have paid off, others, like WeWork (OTC:WEWKQ), have flamed out.
SoftBank CFO Yoshimitsu Goto said that investment activity had slowed in the third quarter but would likely pick up in 2025 as the Stargate project develops.
“Our goal to raise net asset value hasn’t changed. One way to climb this mountain is to invest in OpenAI, others are through Stargate and Cristal. We’ll keep looking for new trailheads.”
SoftBank reported a net loss of 369.2 billion yen ($2.4 billion) in the October-December quarter, hit by unrealised valuation losses at South Korea's Coupang, Chinese ride-hailing firm Didi Global and AutoStore Holdings (OL:AUTO).
The third-quarter result compares to an LSEG consensus estimate of a net profit of 234 billion yen ($1.5 billion) drawn from four analysts and a profit of 950 billion yen in the same period a year earlier.
EYEING CORE AI INFRASTRUCTURE DEVELOPMENT
SoftBank's last investment spree ended in 2022, when rising interest rates prompted a precipitous drop in valuations for high-growth startups, forcing SoftBank into defence mode to stem losses.
The Vision Fund 2 portfolio was hit particularly hard and is yet to recover. It has booked a cumulative loss of $22.2 billion since its inception in 2019.
SoftBank is now hoping to establish itself at the core of AI infrastructure development, even as valuations for AI-related companies such as Nvidia (NASDAQ:NVDA) are sky high.
Sources have told Reuters that SoftBank has committed to invest $15 billion in Stargate, the joint venture between Oracle (NYSE:ORCL), OpenAI and SoftBank which U.S. President Donald Trump said would invest up to $500 billion to build AI data centre capacity in the country.
Goto said on Wednesday that SoftBank's investment would only come in the form of equity.
The enterprise will primarily be funded through project finance, which is often used in energy infrastructure projects and will bring in debt financing from other investors such as banks and insurance companies, Goto added.
SoftBank's cash and cash equivalents dropped to 4.7 trillion yen as of the end of December from 6.2 trillion yen in March which was the end of the previous financial year.
Total (EPA:TTEF) returns for SoftBank, comprising share gains and dividends, are up more than 11% over the 12 months, outperforming a 4% return for the benchmark Nikkei 225 index.
($1 = 153.8500 yen)