SoftBank Bets Big on AI: Eyes on earnings and mega deals

SoftBank is set to report its earnings on Thursday, and the spotlight is firmly on its aggressive investments in artificial intelligence. Analysts and investors are closely watching for details on how these massive bets will be financed, when returns are expected to materialise, and whether any asset sales are on the cards to support new initiatives. (Source: Reuters)

The company has embarked on its biggest investment wave since launching its Vision Funds in 2017 and 2019. A major highlight is SoftBank’s lead role in a $40 billion funding round for OpenAI. Of that, SoftBank plans to contribute $22.5 billion by the end of the year. The remainder has already been subscribed, according to sources.

SoftBank is also spearheading funding for the Stargate project — a $500 billion initiative to build data centres across the United States. The project is part of founder Masayoshi Son’s vision to position SoftBank as the “organiser of the industry.” However, details on the kind of returns this investment may generate are yet to be revealed.

The scale of third-party investment in the Stargate project will influence SoftBank’s approach to financing. Depending on that, it may use tools such as bank loans, debt issuance, or even asset-backed financing. In July, the company raised $4.8 billion by partially selling its stake in T-Mobile, signalling a potential path for raising more funds.

According to Macquarie analyst Paul Golding, if external capital proves insufficient, SoftBank might turn to asset-backed finance. This approach would involve leveraging its equity holdings as collateral to secure fresh funding, providing flexibility without immediately selling key assets.

SoftBank is projected to post a net profit of 127.6 billion yen (approximately $865 million) for the April–June quarter, based on estimates by three LSEG-polled analysts. This would mark the company’s second straight quarter in profit and follows its first annual profit in four years, largely driven by its telecom assets and startup valuations.

Despite the profit rebound, SoftBank’s earnings remain volatile due to its diverse and often unlisted investment portfolio. Its track record in exiting investments and distributing profits has been inconsistent. As of the end of March, its Vision Funds had registered a cumulative investment loss of $475 million.

Still, investor sentiment is largely optimistic. According to LSEG data, 13 out of 18 analysts have a “buy” or “strong buy” rating on SoftBank stock. While there is growing concern that AI-related valuations may be overheated, prices continue to climb. OpenAI is reportedly in early talks for a stock sale that could value it at $500 billion, up from its current $300 billion valuation.

SoftBank’s upcoming earnings call is expected to be a defining moment for its AI-focused future. The market is eager to understand whether these high-stakes bets will pay off, how risks will be managed, and if the current momentum in AI valuations is sustainable in the long run.

(Disclaimer: This slideshow has been sourced from Reuters)