Softbank bets big, offloads $6bn Nvidia stake to bankroll Open AI

SoftBank is betting big on OpenAI, offloading its entire Nvidia stake, worth nearly US$6 billion, to bankroll its AI ambitions.

Founder, Masayoshi Son aims to place the Japanese conglomerate at the heart of the generative AI revolution and the booming market for compute-intensive cloud platforms. But the bold move also raises questions about SoftBank’s growing funding needs and the risks of exposure to a volatile AI market.

The Japanese conglomerate reported a surge in quarterly net profit, driven largely by valuation gains related to OpenAI and other AI-aligned investments across its Vision Fund portfolios. SoftBank disclosed that it sold approximately 32 million Nvidia shares during October, generating an estimated US$5.8 billion in proceeds.

The group also sold off part of its stake in U.S. mobile operator T-Mobile, worth an estimated $9 billion.

SoftBank commented that the disposal of its Nvidia stake was motivated by the need to fund substantial investments into OpenAI as opposed to concerns about Nvidia’s outlook.

We reported last month SoftBank has reportedly authorised a second payment of $22.5 billion to finalise its $30 billion investment in OpenAI.

“Our investment commitments into OpenAI are very significant, and we have to utilise existing assets to finance that growth,” SoftBank’s chief financial officer Yoshimitsu Goto.

SoftBank now holds an estimated 11% stake in OpenAI following the AI developer’s recent restructuring and funding rounds. Microsoft remains the largest external shareholder, with just under 27%. The valuation of OpenAI has soared dramatically over the past year, with recent secondary share sales pricing the company above $500 billion.

SoftBank chief Son has repeatedly described artificial intelligence as a technology that will “fundamentally transform every industry and all of human life”.

The group is already involved in building hyperscale data centre ecosystems, robotics infrastructure, cloud environments and semiconductor technologies through Arm, the UK-based chip designer in which SoftBank remains majority owner.

Earlier this year Softbank, OpenAI and Oracle announced plans to develop five new U.S. AI data centre sites, combined with capacity from Stargate’s flagship site in Abilene, Texas, which, combined with Stargate’s flagship site in Abilene, Texas, brings the total planned capacity to nearly 7 gigawatts, representing more than $400 billion in investment over the next three years. Stargate has a longer-term goal of securing a 10-gigawatt commitment valued at $500 billion.

Market reaction

SoftBank’s share price has more than doubled over the past year, with equity markets increasingly viewing the group as a high-leverage proxy for exposure to OpenAI. However, the investment case remains polarised. Optimists argue that SoftBank is well positioned to benefit from the exponential scaling of AI compute demand, skeptics, however, caution that SoftBank may be over-committing capital in a sector where revenue models remain unproven. Some analysts estimate that SoftBank has pledged more than US$100 billion in AI-related investments, while having less than US$60 billion in readily deployable liquidity.

Yet for SoftBank, the risk of not participating in AI growth appears greater than the risks associated with over-commitment. The company’s Vision Fund continues to generate strong returns from AI-related holdings.

“Our position is that the risk of not investing in AI far outweighs the risk of investing,” added Goto.

SoftBank approves $22.5bn additional investment in OpenAI: report