SoftBank CEO Masayoshi Son delivers a speech at the company’s annual shareholder meeting in Tokyo on June 20, 2024.
Kosuke Okahara | Bloomberg | Getty Images
SoftBank Group The company’s shares hit an all-time high on Thursday as the company’s massive tech investment arm showed signs of recovery and its outspoken founder Masayoshi Son returned to the public spotlight, pitting the Japanese giant against The future of artificial intelligence remains consistent.
The company also benefited from the public market success of British chip designers armin which SoftBank has a majority stake.
Shares of the Japanese giant closed Thursday at a record 11,190.00 yen, a far cry from the company’s downturn during the dot-com crash of the early 2000s and the recent tech market woes of 2021 and 2022.
SoftBank’s journey to the top
Son founded SoftBank in 1981, when the company mainly distributed software. The company went public in Japan in 1994 and invested $2 million in Yahoo during the dot-com boom.
This kicked off the company’s technology investments.
The rise of the Internet and Yahoo pushed SoftBank’s stock price to its highest closing price of 10,111.1 yen on February 18, 2000.
As dot-com stocks plummeted, SoftBank’s stock price fell with it, at one point down more than 90% from its dot-com bubble peak.
It was not until nearly 21 years later, on February 16, 2021, that SoftBank’s stock price exceeded the previous all-time high closing price.
vision fund
Recent share price gains have been erratic since Son launched his massive technology investment arm, the Vision Fund, in 2017, positioning SoftBank as a visionary pioneer.
SoftBank has made dozens of bets on technology companies around the world, some of which have failed. Office-sharing startup WeWork is perhaps one of the most notable names. But some of SoftBank’s investments in Chinese companies also took a hit after Beijing began cracking down on the domestic technology industry in late 2020.
In March 2021, SoftBank shares were hovering near all-time highs at the time before falling sharply along with other global technology stocks. The Vision Fund suffered record financial losses in 2022. He changed tack shortly after the Vision Fund reported a record $32 billion loss in 2023, saying the company would now go “on offense” because he was excited about investment opportunities in artificial intelligence.
SoftBank’s share price has been recovering since around May 2023, and the Japanese giant’s Vision Fund has recently reported better financial results amid a broader recovery in technology stocks.
“Due to falling equity values and a tougher private equity financing environment, SoftBank Vision Fund has had to write down various investments. It looks like the write-down cycle is basically complete, and the IPO market is likely to be more constructive Oliver, head of Asia consumer research at CLSA Oliver Matthew told CNBC via email: “In the future, especially investments related to artificial intelligence. “
Arm chip boost
Several analysts attribute SoftBank’s recent stock price rise of about 78% year-to-date to The initial public offering (IPO) of Arm, acquired in 2016, was successful.
Even after Arm went public, SoftBank still owned about 90% of the shares. As of the close of trading on July 3, Arm’s stock price had risen nearly 124% this year alone.
“SoftBank Group’s investment strategy and focus has long included the development of an AI ecosystem portfolio, long before the LLM (Large Language Model)-driven bull cycle in AI-related names over the past 18 months or so,” Paul Golding, U.S. veteran Macquarie U.S. Equity Research’s lifestyle and payments analyst told CNBC via email.
“We believe this vision may have driven part of the investment decision to acquire Arm in 2016, giving SoftBank Group direct exposure to semiconductor market dynamics and ownership of intellectual property rights around semiconductor designs, well ahead of broader advances in AI use cases and platforms.” .
Golding added that SoftBank shares “have been benefiting from such well-known uses” of Arm’s intellectual property, such as in the automotive industry or cloud data centers.
Do investors believe SoftBank’s story?
For years, investors have focused on whether SoftBank Group Corp.’s valuation fairly reflects the assets it invests or holds.
For example, SoftBank is valued at approximately $101.5 billion. Arm’s market cap is about $176 billion, meaning SoftBank’s 90% stake is equivalent to about $158 billion of that figure. That alone is significantly higher than SoftBank Group’s overall valuation, without taking into account the company’s other holdings and businesses, such as its telecoms unit.
Analysts see this as a reason why SoftBank’s share price does not reflect its fair value.
Dan Baker, a senior equity analyst at Morningstar, said SoftBank’s share price rise is largely due to Arm.
“I’m not sure investors will believe SoftBank’s story again,” Baker told CNBC in an email. He added that this year’s share price rise was “primarily” due to a rise in Arm’s stock price and a weaker yen. Baker said it’s worth looking at so-called sum-of-the-parts (SOTP) valuations, which assign a value to the various parts of SoftBank’s stake to calculate the value of the company. Baker said SOTP’s valuation this year is still just under 50%, meaning SoftBank’s shares don’t truly reflect the value of its various businesses and investments.
“So I’m not sure investors ‘believe the SoftBank story,’ but investors certainly believe the ARM story,” Baker said.
Investors also cheered SoftBank’s sale of nearly all of its stake in Alibaba, the Chinese e-commerce giant in which Son invested in 2000.
SoftBank may also benefit from Japan’s recent overall stock market rally, Nikkei 225 Index As of Thursday, the index was up just 22% this year.
artificial superintelligence
But could Son’s focus on artificial intelligence further boost SoftBank’s value and narrow the discount on its basket of assets?
The SoftBank founder, who stepped out of the public eye last year, recently spoke about his excitement for the future of artificial intelligence and how SoftBank is becoming a centerpiece of the technology through investments in companies like Arm.
Son last month laid out his vision for a world he calls Super Artificial Intelligence (ASI), 10,000 times smarter than humans.
This comes at a time when investors are keenly paying attention to how to respond to the artificial intelligence boom, with the parabolic growth of artificial intelligence. NVIDIA The share price underscores excitement about the technology.
CLSA’s Mathieu said SoftBank’s discount may be reduced in the future due to some of its early AI investments.
“SoftBank’s investment direction is absolutely consistent; they were one of the earliest investors behind the artificial intelligence theme, but it was still early in some aspects, so many investors felt that they paid too much or bought something that was not clear about artificial intelligence. How smart companies work.
“As a result, SoftBank Group’s shares are trading at a surprisingly large discount to their fair value, and we believe this discount will narrow in the future.”
About The Author
