SoftBank Sells Entire Nvidia Stake for $5.83 Billion

SoftBank Group Corp. (9984.T) has divested its entire stake in Nvidia (NVDA) for $5.83 billion, the company announced Tuesday. This strategic maneuver comes as the Japanese investment giant doubles down on its investments in the burgeoning artificial intelligence sector, specifically its substantial backing of OpenAI, the company behind ChatGPT.

According to the company’s earnings release, SoftBank offloaded 32.1 million Nvidia shares in October. This follows the recent sale of a portion of its T-Mobile stake, which generated $9.17 billion.

“We aim to create numerous investment avenues for investors while maintaining a robust financial footing,” stated SoftBank’s Chief Financial Officer Yoshimitsu Goto during an investor presentation. Goto further elaborated that these asset monetization strategies are designed to ensure the company is adequately prepared for future funding opportunities in a secure manner.

Nvidia shares experienced a slight dip, declining 0.95% in premarket trading following the announcement.

While the full exit from Nvidia may be unexpected to some investors, it isn’t the first time SoftBank has capitalized on the artificial intelligence chip designer’s impressive growth. Market analysts suggest that this move is likely driven by SoftBank’s need to rebalance its portfolio and secure liquidity to support its broad range of AI ventures.

SoftBank’s Vision Fund previously held a significant stake in Nvidia, reportedly accumulating a $4 billion position in 2017 before liquidating its holdings in January 2019. Despite this recent sale, SoftBank remains deeply invested in the AI landscape, and its activities are intertwined with Nvidia’s technologies.

SoftBank is currently involved in a multitude of AI ventures that heavily rely on Nvidia’s cutting-edge technology. One notable example is the $500 billion Stargate project, designed to construct state-of-the-art data centers in the United States. These facilities are specifically designed for AI and high-performance computing, and are expected to be key to next generation AI development, according to industry sources.

Rolf Bulk, an equity research analyst at New Street Research, doesn’t view this sale negatively. “This shouldn’t be seen as a cautious or negative stance on Nvidia, but rather in the context of SoftBank needing at least $30.5 billion of capital for investments in the Oct-Dec quarter, including $22.5 billion for OpenAI and $6.5 billion for Ampere.” He added that this capital allocation is exceptional, “amounting to more in a single quarter than it has invested in aggregate over the two prior years combined.”

Morningstar’s Dan Baker echoes this sentiment, suggesting the transaction doesn’t signal a fundamental shift in SoftBank’s overall strategy. “They made a point of saying that it wasn’t any view on NVIDIA… At the end of the day, they are using the money to invest in other AI related companies,” Baker stated.

The recent stake sales, coupled with a substantial $19 billion gain from SoftBank’s Vision Fund, contributed to the company doubling its profit in its fiscal second quarter.

The Vision Fund has been aggressively expanding its reach in artificial intelligence, investing in and acquiring multiple firms along the AI value chain, encompassing chip design, large language models and robotics. These strategic investments underline SoftBank’s commitment to becoming a dominant player in the AI ecosystem.

“The reason we were able to have this result is because of September last year, that was the first time we invested in OpenAI,” noted SoftBank’s Goto. He further highlighted OpenAI’s latest valuation milestone of $500 billion, stating that it represents one of the largest valuations worldwide, based on fair value assessments.

The Japanese conglomerate’s stock has seen volatility recently. Concerns about an AI bubble sent jitters through global markets recently, impacting their trading value. Specifically, investors are starting to exercise more caution in rapidly scaling AI startups.

“Our share price recently has been going up and down dynamically,” said Goto. “We want to provide as many investment opportunities as possible”. He noted that the company’s announced four-for-one stock split forms part of its strategy to provide shareholders with increased investment opportunities.