SoftBank posts $7 billion quarterly loss as AI investment risks mount

Japanese technology investor SoftBank Group reported a net loss of 1.1 trillion yen ($7 billion) for the July-September quarter on Tuesday, reversing a profit of 2.5 trillion yen in the same period last year, according to a report by Reuters.

The profit a year earlier was driven by a substantial investment gain following an increase in the valuation of SoftBank's stake in OpenAI, the maker of ChatGPT, the report stated.

The latest results highlight the volatility of SoftBank's earnings as the company continues to make substantial investments in artificial intelligence. Forecasts from three analysts polled by LSEG had ranged from a profit of 233 billion yen to a loss of 113 billion yen, according to Reuters.


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SoftBank's growing exposure to the AI sector has raised concerns among investors about its ability to withstand a potential downturn. The company has spent $64.6 billion to build a 13% stake in OpenAI, making the investment a major component of its AI strategy.

Investor sentiment towards the sector has weakened amid concerns over valuations, profitability and potential regulatory scrutiny. The Democratic Party's sweeping gains in last week's US midterm elections have further fuelled expectations of tighter oversight of the technology industry.

SoftBank shares have also come under significant pressure, almost halving in value since the beginning of June, tracking a broader selloff in AI-related stocks.

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The sector has faced additional uncertainty following reports that the FBI is examining Nvidia CEO Jensen Huang in connection with his alleged relationship with a Chinese businesswoman suspected of spying for Beijing, as per the report.

SoftBank was previously a major investor in Nvidia but no longer holds a stake in the chipmaker.

The developments have added to concerns surrounding the AI investment boom, with investors increasingly assessing whether the massive capital flowing into the sector can generate sustainable returns.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)