SoftBank is selling its entire stake in Nvidia for $5.8 billion in a surprise move

SoftBank Group Corp. sold his entire stake in Nvidia Corp., pocketing $5.8 billion ahead of a series of planned investments by founder Masayoshi Son to build his own sphere of influence in support of artificial intelligence.The Tokyo-based company had increased its stake in Nvidia to about $3 billion by the end of March. That effort and a windfall at startup investment unit Vision Fund helped SoftBank report a surprise net income of ¥2.5 trillion ($16.2 billion) in the fiscal second quarter, well above the average of analyst estimates of ¥418.2 billion.

On Tuesday, SoftBank also announced a 4-for-1 stock split that will take place on January 1.

Son’s company now has a portfolio that includes some of the world’s most sought-after names in AI: OpenAI and Oracle Corp. These holdings boosted SoftBank’s paper profits, sending the stock up 78% in the three months ended September – its best performance since the December 2005 quarter.

The number of bets where SoftBank successfully recoups its investment has increased, “so we are raising our forecasts,” Citigroup analyst Keiichi Yoneshima wrote in a note ahead of the earnings release. The analyst set his price target for SoftBank shares at ¥27,100, tying his calculations to OpenAI’s valuation and assuming a future valuation range of $500 billion to $1 trillion for the ChatGPT operator.

Son, 68, is aggressively trying to capitalize on growing investment in AI and chips, even as he scales back other investments. The SoftBank founder’s ambition has fueled initiatives including the rollout of the Stargate data center and a planned $30 billion investment in OpenAI. Son also advocates for Taiwan Semiconductor Manufacturing Co. and others about participating in a $1 trillion AI manufacturing center in Arizona. SoftBank even completed an acquisition of American chipmaker Marvell Technology Inc. earlier this year. investigated. The challenge will be balancing the financing behind the new investments, which include about $20 billion for OpenAI and $6.5 billion for the planned acquisition of chip designer Ampere Computing LLC. Concerns also remain about the high valuations that support AI companies and their capital expenditures, and who will ultimately benefit from the large data centers and other infrastructure under construction. ​​”The simple trade was to buy SoftBank for cheap exposure to Arm stock and a broader AI and technology mix. That idea has more than paid off, with the stock more than doubling and easily outpacing the modest increase in NAV,” said a Finimize Research note published on Smartkarma ahead of the earnings release, referring to SoftBank’s intrinsic value.

“But now the discount has largely closed, so SoftBank is no longer a ‘cheap’ way to get in. So on that basis, it’s probably a good time to sell and take your profits,” the report said.