Nvidia vanishing cream for AI makeup
SoftBank sold Nvidia shares for billions to invest in OpenAI. This move intensifies focus on AI funding. While SoftBank sees AI revenue as different from the dotcom era, investor concerns about a bubble persist. OpenAI aims for a massive valuation...
By ET Bureau |
Reuters
The high-stakes poker game of funding AI has become more intense with SoftBank's sale of its Nvidia stake for a nifty $5.8 bn to fund commitments to OpenAI. SoftBank's valuations are dovetailing into those of the ChatGPT creator as Masayoshi Son doubles down on his concentrated bet on AI and its super infrastructure. This is not the first time SoftBank is being accused of mismanaging its Nvidia trade. The company timed an earlier stake sale just about when the AI boom was taking off, only to buy back in later. This time, Nvidia provided Son with an easy exit by hitting $5 tn in market capitalisation.
SoftBank's action, however, stokes concerns over an AI bubble. The company sees a distinction with the dotcom era by pointing to growing AI revenue streams. Yet, it did not satisfy investors that AI's need for capital and chips is sustainable. Son will have to pass the hat around even more and convince a new class of investors that the sums being sought for building AI infrastructure are justified. Particularly when AI firms are duking it out over the breakthrough product. Betting on just one horse in this race is certainly not for the faint of heart.
AI valuations are, at this point, completely unhinged from earnings. Since this is a new investment thesis, there is no valuation benchmark. Yet, last week's action by SoftBank affirms the notion that the world will not survive without AI's promised superintelligence. Investor appetite is intense, though. OpenAI may be considering a $1 tn listing to fund around $1.4 tn in AI infrastructure deals. This should make some investors walk away from the table. SoftBank, and Son, will not be among them. Microsoft and SoftBank will hit paydirt if OpenAI fetches its eye-watering valuation. Across the aisle, Tesla's investors are willing to make a big investment in AI, but are baulking at the fancy price tags of startups. Elsewhere in the market, the shorts are building up against AI workhorses like Nvidia. There is no escaping talk of an AI bubble.
SoftBank's action, however, stokes concerns over an AI bubble. The company sees a distinction with the dotcom era by pointing to growing AI revenue streams. Yet, it did not satisfy investors that AI's need for capital and chips is sustainable. Son will have to pass the hat around even more and convince a new class of investors that the sums being sought for building AI infrastructure are justified. Particularly when AI firms are duking it out over the breakthrough product. Betting on just one horse in this race is certainly not for the faint of heart.
AI valuations are, at this point, completely unhinged from earnings. Since this is a new investment thesis, there is no valuation benchmark. Yet, last week's action by SoftBank affirms the notion that the world will not survive without AI's promised superintelligence. Investor appetite is intense, though. OpenAI may be considering a $1 tn listing to fund around $1.4 tn in AI infrastructure deals. This should make some investors walk away from the table. SoftBank, and Son, will not be among them. Microsoft and SoftBank will hit paydirt if OpenAI fetches its eye-watering valuation. Across the aisle, Tesla's investors are willing to make a big investment in AI, but are baulking at the fancy price tags of startups. Elsewhere in the market, the shorts are building up against AI workhorses like Nvidia. There is no escaping talk of an AI bubble.
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