Japan’s SoftBank Group has reported a net profit of 248.6 billion yen for the October-December quarter. This result marks a huge turnaround from the 369 billion yen loss it saw during the same period last year. The main driver behind this recovery is the skyrocketing valuation of OpenAI. Masayoshi Son has placed a massive bet on the ChatGPT maker and it is now starting to reflect in the company’s bottom line. SoftBank now holds about an 11 percent stake in OpenAI after investing over $30 billion into the firm.
The market now views SoftBank as a proxy for the red-hot AI sector. The conglomerate expects a total gain of nearly $20 billion on its OpenAI investment by the end of December. To fund this aggressive spending spree, SoftBank has been selling off other assets. It recently exited its position in Nvidia and sold a large chunk of its T-Mobile shares for over $12 billion. However, the group is also taking on more debt to stay in the game. It expanded a margin loan using its shares in chip designer Arm to $20 billion.
Indebtedness is becoming a point of discussion for many global investors. SoftBank’s loan-to-value ratio rose to 20.6 percent from 16.5 percent in just three months. Its cash pile also decreased as it funneled money into new AI ventures. While OpenAI is currently the leader in large language models, it faces rising costs and tough competition from Google and others. OpenAI is also reportedly looking for another $100 billion in capital at a massive valuation of $830 billion.
SoftBank shares rose over 2 percent before the earnings were officially released in Tokyo. Investors are excited about the potential IPO of OpenAI which could be one of the biggest listings in history. For now Son’s “all-in” strategy on artificial intelligence seems to be working for the company’s balance sheet. The group remains focused on finding the next big winners in the tech world while managing its growing pile of debt.
