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Masayoshi Son has earned some leeway for bold bets on artificial intelligence. Having Arm under his wing, which helped Son’s SoftBank Group to a second consecutive quarter of profitability, could even lower the risk of failed bets.
After years of haphazard technology bets around the globe, Son’s shift to a more conservative stance has paid off. The Tokyo-based group managed a net profit of ¥231bn ($1.5bn) in the quarter to March despite its Vision Fund reporting a loss. A large number of lossmaking start-ups in its second Vision Fund have weighed on group earnings in recent years. Indeed, SoftBank still posted an annual loss for the third consecutive year.
SoftBank has been a beneficiary of the weaker yen, as it invests in US companies. One of the best performing is food delivery group DoorDash, whose shares are up nearly 75 per cent in the past year.
But the key boost comes from Arm, whose shares are up more than 70 per cent since its US listing. SoftBank owns about 90 per cent of the UK-based chip designer, which now has a valuation of more than $110bn. Arm was the main reason for a 45 per cent increase in SoftBank’s net asset value to a record high of Y27.8tn. It accounts for nearly half of the total in terms of asset composition.
Improving earnings means SoftBank was sitting on a cash pile of ¥6.2tn at the end of March. Son has been doubling down on investments in AI and chip-related themes, with SoftBank leading a $1.05bn funding round for UK self-driving start-up Wayve Technologies last week. It is reported to be in talks to acquire British semiconductor start-up Graphcore. Arm is also looking to develop its own chips, setting up an AI chip division to build a prototype.
Making progress here while maintaining its biggest strength — customer neutrality — will be a difficult balance to strike. Development costs will be high. While Arm has decades of experience in chip design and dominates in the area of central processing unit cores for mobile devices, catching up with the likes of Nvidia on designs for the graphics processing units used in data centres and AI is another task altogether.
The risk of overpaying for investments into AI start-ups this year, at today’s lofty valuations, is also substantial. It has only been a year since SoftBank posted record annual investment losses of ¥5.3tn in its tech-heavy Vision funds
This time, at the very least, Son’s investments have a common theme. The next step for Son will be figuring out a way — credibly — to get Arm involved.