Softbank Sells Millions of Nvidia and Telecom Shares for New AI Investments

Nvidia's stock price fell by almost three percent yesterday after Softbank sold all its shares in the GPU manufacturer. Softbank's divestment from Nvidia Securities, the Japanese conglomerate and major investor in several AI companies, is sparking renewed fears of a possible bursting of the AI bubble. However, Softbank apparently only needs new funds for OpenAI and the processor manufacturer Ampere. Especially since the Japanese company has also sold millions of shares in T-Mobile and Deutsche Telekom.

Through these share sales, Softbank generated a total of 12.1 billion US dollars in the last quarter. The Nvidia shares were valued at 5.8 billion dollars, and the T-Mobile securities fetched 4.4 billion dollars. The Japanese conglomerate did not sell all its shares in T-Mobile, which also applies to Deutsche Telekom. This latter transaction brought 1.9 billion dollars into Softbank's coffers.

However, these share sales are not enough for the new investments in the AI company and the CPU manufacturer. For the largest private funding round in the tech industry, through which OpenAI receives 40 billion, announced in April of this year, Softbank is contributing 30 billion dollars. In addition, the purchase price of 6.5 billion dollars for the acquisition of Ampere Computing, which will thus belong to Softbank like ARM and Graphcore, is due by the end of the year. Furthermore, the Japanese tech conglomerate will also invest billions in Project Stargate, an AI infrastructure with data centers in the USA.

Softbank: Net Profit Doubles, Share Price Quadruples

However, Softbank can likely afford it, as the net profit for the last six months has nearly doubled year-on-year to the equivalent of almost 19 billion dollars. At the same time, the Japanese conglomerate's revenue has only increased by 7.7 percent to the equivalent of 24.2 billion dollars, as Softbank reports.

As Softbank's share price has nearly quadrupled in the past six months, the Japanese tech conglomerate is now announcing that it will quadruple its shares at the turn of the year. This share split will turn one share into four. Last week, Softbank already founded a joint venture with OpenAI called “SB OAI Japan.” This is intended to encourage Japanese companies to use artificial intelligence more.

Softbank's Bad Experiences Selling Nvidia Shares

However, Softbank has had little luck selling Nvidia shares in the past, as Reuters notes. While the GPU manufacturer's stock market value has more than quadrupled in the past three years, making it not a bad time to sell the securities. However, the Japanese conglomerate already sold many Nvidia shares in 2019 before the AI boom began, only to re-enter Nvidia later -- at higher prices.

This caused Softbank to miss the rally, and the conglomerate led by founder Masayoshi Son missed out on potential billions in profits. “In terms of timing, you can't say Masayoshi Son has shown a good hand in trading Nvidia shares,” says C.J. Muse, a senior manager at a US financial services firm. “It just seems to be resource allocation -- raising funds to make bets elsewhere.”

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