"Last month, I promised $100 billion, and President Trump said, 'Masayoshi, let's go for $200 billion.' So, I returned with $500 billion."
On the day after President Trump's second term began in January last year, Masayoshi Son, chairman of SoftBank Group, announced a $500 billion AI infrastructure plan called 'Stargate' from the White House podium.
His declaration that "the golden age of America has begun" was echoed by President Trump, who referred to it as a "golden age." It seemed a bright future lay ahead for both men. However, about one year and ten months later, on November 11, SoftBank Group's stock fell by more than 10% during trading on the Tokyo Stock Exchange. This drop followed the announcement of a 768 billion yen ($6.5 billion) net loss for the period from April to September, largely due to significant losses in its U.S. AI data center business.
SoftBank Group's stock opened down 407 yen (10.51%) at 3,465 yen but later reduced its losses, finishing the morning session down 107 yen (2.76%) at 3,765 yen. The initial shock to the market was substantial, especially considering the company had reported a net profit of 2.924 trillion yen during the same period last year. According to the Nihon Keizai Shimbun (Nikkei), the market had anticipated a profit of 227.7 billion yen for this year.
SoftBank Group made advance payments to secure power facilities for its U.S. data centers, but due to changes in procurement plans, this money has been recorded as a loss. Including losses from contract changes and settlements, the total loss amounts to approximately 600 billion yen. Keisuke Yoneshima, an analyst at Citigroup, noted in a report that while SoftBank's quarterly profits can fluctuate based on market conditions, this loss was "unexpected."
Investment profits that had boosted last year's half-year results have also declined. The Vision Fund's investment profits, which include investments in OpenAI, fell to 341.2 billion yen, about one-tenth of the same period last year, as the valuations of its portfolio companies did not rise significantly. Increased selling and administrative expenses also added to the burden. For the July to September period alone, the net loss reached 1.1153 trillion yen, marking the first quarterly deficit since October to December 2024.
The resources for continued investments are also dwindling. The net asset value (NAV), calculated by subtracting net debt from the value of held stocks, dropped to 59.8 trillion yen by the end of September due to declines in the stock prices of companies like Arm, a British semiconductor design firm. This represents a decrease of 12.5 trillion yen from the end of June. According to Nikkei, it has recently fallen to 44.7 trillion yen, with an additional loss of 15.1 trillion yen since the end of September. The loan-to-value ratio (LTV) also increased to 15.9% by the end of September, up 2.9 percentage points from the end of June, and has continued to rise. The company's established threshold is below 25%.
Son's biggest bet is on OpenAI. According to Nikkei, he has invested a total of 10 trillion yen, which is nearly five times the $14.3 billion in debt incurred from the U.S. co-working company WeWork. Son's strategy resembles the game Othello; by controlling all four corners, he aims to dominate the AI era by acquiring physical AI used in AI models, data centers, semiconductors, and robotics.
However, all four corners are currently shaky. OpenAI applied for an initial public offering (IPO) in June but postponed its listing until after 2027. The data centers have incurred significant losses, and the semiconductor sector, particularly Arm, has struggled, with three subsidiaries in the AI computing sector reporting a loss of 322 billion yen from April to September. The acquisition of physical AI has also faced uncertainty as the Chinese authorities have intervened in the purchase of ABB's robotics business.
Nevertheless, Son shows no signs of backing down from his all-in strategy. At an event in Kyoto last month, he stated, "People ask if AI is a bubble, but I believe the question itself misses the point. We are only at the beginning."
Son's strong backing from President Trump, who led the Republican Party, faced a setback in the recent midterm elections. Nikkei suggests that calls for AI regulation may gain traction in the U.S., particularly affecting data centers. In Texas and Ohio, where SoftBank's subsidiary SB Energy is pursuing five data centers, candidates critical of construction have been elected as governors. The Texas governor-elect has pledged to halt new approvals, while the Ohio governor-elect has promised conditional delays. Approximately 90% of the planned buildings in both states have yet to break ground. SB Energy released its IPO prospectus in September, but the timing of its listing remains uncertain.
SoftBank Group's Chief Financial Officer Yoshimitsu Goto also mentioned during a performance briefing on the 10th that it may be time to consider various factors regarding the AI market's safety, indicating that the entire data center project could face delays. However, he noted that OpenAI is likely to reflect significant growth in its performance for the October to December period. According to Bloomberg, OpenAI aims to raise $20 billion and has already secured $11 billion. If OpenAI's valuation increases during this funding round, the value of SoftBank Group's stake could also rise.
Son has rebounded from setbacks such as the dot-com bubble burst, failed acquisitions of U.S. telecom companies, and the WeWork debacle, thanks to successes with Alibaba and Arm. If OpenAI's IPO succeeds, the situation could change dramatically. However, as SoftBank deepens its involvement in U.S. AI, the costs of failure also increase. Nikkei warns that if financial indicators worsen, SoftBank Group may shift from an aggressive stance to a defensive one, potentially leading to prolonged stagnation.
* This article has been translated by AI.
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