SoftBank Bets on OpenAI Despite ‘Big Short’ Investor’s Warnings

SoftBank has divested its entire stake in Nvidia, totaling 32.1 million shares sold in October for $5.83 billion, according to its recent earnings statement. However, the reasons behind this strategic move appear more nuanced than a simple concern over Nvidia’s inflated valuation.

While the timing of the sale might initially suggest a bearish outlook on Nvidia, particularly amidst broader anxieties about AI valuations and potential market corrections, sources familiar with SoftBank’s decision indicate a different motive: reinvestment into the burgeoning field of generative AI.

The sale comes amidst scrutiny of AI infrastructure spending. Michael Burry, known for predicting the 2008 financial crisis, recently raised concerns about AI hyperscalers potentially “understating depreciation” of AI chips, thereby artificially boosting earnings. Such accounting practices, if widespread, could present a skewed picture of profitability in the AI sector. However, this alleged practice does not appear to be the reason for SoftBank’s change of heart.

Instead, SoftBank is strategically reallocating capital. The proceeds from the Nvidia sale are earmarked for bolstering SoftBank’s significant $22.5 billion investment in OpenAI, the company behind ChatGPT and other groundbreaking AI technologies. This move underscores SoftBank’s conviction in the long-term potential of generative AI and its commitment to strengthening its position in this rapidly evolving landscape.

This decision also highlights a crucial strategic shift within SoftBank. Rather than simply holding a diverse portfolio of promising tech companies, SoftBank is now consolidating its focus and deepening its commitment to a select few, particularly those at the forefront of the AI revolution. This concentrated approach reflects a belief that the future of technology lies in transformative AI solutions, and that significant capital investment is required to fully realize their potential.

The move also demonstrates a willingness to forgo short-term gains for long-term strategic positioning. While Nvidia has been a high-performing asset, SoftBank is betting that the returns from OpenAI, and generative AI more broadly, will ultimately surpass those of holding onto its Nvidia shares. This represents a calculated risk, but one that aligns with SoftBank’s track record of making bold, future-oriented investments.