Japanese tech conglomerate SoftBank has reported significant gains in its Vision Fund division, marking a comeback fueled by strategic shifts toward artificial intelligence (AI) and aggressive share buybacks. The company logged a 608.5 billion yen ($3.96 billion) gain in its Vision Fund tech investment arm for the second fiscal quarter ending September 30, 2024, following a positive turnaround from losses in the previous quarter. As global tech markets undergo rapid transformations, SoftBank is positioning itself to capitalize on AI advancements while managing investor pressure and Japan’s economic volatility.

In the broader Vision Fund segment, which includes administrative costs and performance adjustments from third-party investor contributions, SoftBank recorded an overall gain of 373.1 billion yen. This increase is largely attributed to valuation gains in Vision Fund 1, with major growth in the share prices of investments such as e-commerce firm Coupang and Chinese ride-hailing giant Didi Global. SoftBank also benefited from the rising value of its stakes in ByteDance, the parent company of TikTok, showcasing the fund’s focus on high-growth tech firms across diverse sectors.

However, the Vision Fund 2 reported a net loss of 232.6 billion yen, driven by declining share prices in companies like Norwegian robotics firm AutoStore and U.S.-based automation technology company Symbotic. This mixed performance across SoftBank’s two Vision Funds highlights the challenges associated with navigating the volatile tech market. Yet, the strategic listing of Arm Holdings, a smartphone chip designer in which SoftBank holds a nearly 90% stake, provided a boost. Arm’s successful September 2023 IPO offered SoftBank fresh capital, essential for its pivot towards emerging AI opportunities.

Masayoshi Son, SoftBank’s visionary CEO, remains resolute in his belief that artificial intelligence will reshape global industries. Known for his early investments in Yahoo! and Alibaba, Son now predicts a future where AI technology outpaces human intelligence by 10,000 times within a decade. Recently, he made waves by labeling Nvidia — the U.S. chip giant now valued at $3.57 trillion — as “undervalued.” Nvidia’s success has underscored the demand for AI-driven hardware, especially in the data center GPU market. Media reports also indicate that SoftBank plans to invest $500 million in OpenAI’s latest funding round, further aligning itself with key players in the AI field.

For the wider SoftBank Group, net sales increased by 6% to 1.77 trillion yen, spurred by robust returns on its stakes in prominent companies. The group saw substantial investment gains from its shares in Alibaba, the Chinese e-commerce behemoth, and T-Mobile, adding an estimated 1.28 trillion yen and 566.2 billion yen, respectively. Tokyo-listed shares of SoftBank have appreciated by approximately 50% this year, reflecting investor optimism towards the company’s AI-centric strategy.

Adding to the positive momentum, SoftBank has taken steps to address shareholder demands for increased returns. Pressure from activist investor Elliott Management, which holds a $2 billion stake in the company, led to a call for a share buyback worth $15 billion. In response, SoftBank committed to a buyback of 6.8% of its outstanding shares, totaling 500 billion yen ($3.25 billion), with a cumulative 153.8 billion yen repurchased by the end of the second quarter. This move aims to enhance shareholder value and underscores SoftBank’s responsiveness to external investor pressure.

However, Japan’s economic landscape has introduced challenges. SoftBank’s performance in recent quarters has been influenced by fluctuations in domestic markets, particularly due to the rapid strengthening of the yen and the sell-off of high-risk assets in August 2024. Japanese markets experienced notable instability over the summer, driven partly by the Bank of Japan’s (BOJ) shift away from its ultra-low interest rate policy. Although markets have stabilized somewhat, analysts warn that volatility may persist, with potential interest rate hikes anticipated in late 2024 or early 2025.

Analysts at Barclays pointed to the BOJ’s ongoing efforts to stimulate wage growth, especially in Japan’s service sector, as a sign that further monetary tightening could be on the horizon. “This volatility is likely to continue,” Barclays analysts wrote on November 8, highlighting that wage growth aligns with BOJ expectations, suggesting a December or January rate hike as a probable scenario. This economic uncertainty adds a layer of complexity for SoftBank, which operates at the intersection of Japan’s shifting policy environment and the global tech sector’s rapid evolution.

Looking ahead, SoftBank’s AI-focused investments could shape its trajectory, with Son’s vision of an AI-driven world resonating amid rising interest in technologies like generative AI, machine learning, and robotics. As companies worldwide push to leverage AI, SoftBank’s alignment with major players, including Nvidia and potentially OpenAI, positions it to benefit from the global demand for advanced AI applications.

The coming years will test SoftBank’s adaptability to market shifts and its capacity to maintain profitability amid fluctuating valuations in tech. With its Vision Funds playing pivotal roles in high-stakes tech bets, and under Son’s forward-looking leadership, SoftBank aims to stay at the forefront of innovation. However, success hinges not only on AI but also on carefully navigating Japan’s changing economic policies and meeting shareholder expectations through strategic buybacks and investment returns. As global tech companies like SoftBank lead the AI revolution, their financial and strategic choices will shape the future of the tech industry.

(Adapted from BeamStart.com)