The recent financial report released by SoftBank Group has stirred the stock market, revealing that the technology-focused Vision Fund suffered considerable losses after experiencing two consecutive profitable quartersThe company reported a staggering net loss of 369.17 billion yen (approximately $2.41 billion) for the third quarter of the 2024 fiscal year, significantly exceeding market expectations of a loss of just 154.79 billion yen ($1.02 billion).

SoftBank’s Vision Fund, a significant player in the tech investment arena, was the primary source of these lossesWithin the same period, it reported a net loss of 352.7 billion yen (around $2.31 billion), a stark turn from the previous quarter's gain of 608.4 billion yen ($3.98 billion). This shift in fortune highlights the volatility and unpredictability often associated with tech investments, particularly in emerging markets.

Adding fuel to the fire, just a week prior, SoftBank was in the limelight for its ambitious plan to invest $40 billion directly into OpenAI, which could position it as one of the largest stakeholders in the AI arenaDespite this bold move, the company's recent financial health raises concerns regarding its capacity to sustain such investments without affecting cash flowThe dilemma is exacerbated by the recent rise in uncertainties surrounding the AI sector, particularly due to competitive pressure from other tech entities.

In a press conference, SoftBank reaffirmed its commitment to the AI sector, stating that it would continue to make significant investmentsHowever, as companies like Deepseek disrupt existing trajectories in artificial intelligence, the crucial question remains: Can SoftBank maintain its high valuation of OpenAI to continue attracting investments?

The Vision Fund's performance since its inception has been marked by extremesFollowing its launch in 2017, it amassed a total investment of $89.5 billion, yielding returns of $11.11 billion, and total revenue of $21.6 billion

Advertisements

However, the second fund, launched in 2019, has also shown signs of struggle, accumulating a total investment of $55.2 billion while incurring a staggering loss of $22.2 billionThe volatility was so profound that in the second quarter of 2022, the fund recorded an unprecedented loss of 29.3 trillion yen in a single quarter.

Moreover, as reported, the performance of the first fund was largely impacted by the dismal performance of key investments in the portfolio, notably Coupang, South Korea's largest e-commerce platform, which saw steep declines in its stock priceThe second fund's losses were even more significant, largely due to the tumble of Ola Electric Mobility in India and AutoStore in Norway—companies in which the fund had significant stakes.

As losses continue to mount, the implications for the future of SoftBank and its Vision Fund become increasingly concerningThe company’s cash flow situation is dire, with a net cash inflow from operating activities reaching only 149.22 billion yen ($943 million) over the first nine months of last year, contrasted by an investment outflow of 589.19 billion yen ($3.72 billion).

In terms of capital allocation, the Vision Fund alone utilized 249.1 billion yen ($1.57 billion) for investments, with an additional 566.5 billion yen ($3.58 billion) sourced from SoftBank and its subsidiaries for various acquisitions, totaling 814.6 billion yen ($5.15 billion). This contrasts starkly with returns derived from investment sales, which amounted to 3.367 billion yen ($21.8 million) against a backdrop of rising investment costs.

Even amidst a considerable downturn in tech investments, SoftBank’s commitment to AI remains unwaveringIn September of last year, the second Vision Fund made an initial $500 million investment in OpenAI, which was subsequently boosted by an additional $1.5 billion investment in January 2024. Earlier this month, SoftBank, in conjunction with OpenAI and Oracle, announced the ambitious “Stargate” initiative, pledging up to $500 billion towards U.S.-based AI infrastructural developments over the next four years.

However, skepticism persists regarding SoftBank's ability to secure additional funding for this transformation

Advertisements

Advertisements

Advertisements

Advertisements