SoftBank, the Japanese technology conglomerate, has made headlines with the complete sale of its stake in U.S. chipmaker Nvidia, netting a significant $5.83 billion. This strategic move aligns with SoftBank’s aggressive “all-in” investment philosophy, particularly its deepening commitment to OpenAI, the creator of ChatGPT.

SoftBank Divests Nvidia, Bolsters OpenAI Investment

The company confirmed in its recent earnings statement that 32.1 million Nvidia shares were offloaded in October. Simultaneously, SoftBank also reduced its holdings in T-Mobile, generating an additional $9.17 billion.

Yoshimitsu Goto, SoftBank’s Chief Financial Officer, emphasized the rationale behind these divestments during an investor presentation. “We want to provide a lot of investment opportunities for investors, while we can still maintain financial strength,” Goto explained, adding that these sales are integral to the firm’s “asset monetization” strategy, ensuring robust funding capabilities.

Market Reaction and Strategic Context

Following the announcement, Nvidia’s shares experienced a modest 2% dip on Tuesday. Sources familiar with the matter indicate that the proceeds from the Nvidia and T-Mobile sales, alongside a margin loan on SoftBank’s Arm holdings, are earmarked to fund substantial projects. This includes a massive $22.5 billion investment in OpenAI and other ventures such as the acquisition of ABB’s robotics unit.

Significantly, the decision to exit Nvidia was not driven by concerns over artificial intelligence valuations, according to insiders. This isn’t SoftBank’s first time cashing out of the AI chip giant; the Vision Fund, an early Nvidia backer, previously sold its entire $4 billion stake in 2019 after accumulating it in 2017.

Continued AI Interdependence

Despite the complete divestment, SoftBank’s business interests remain intricately linked with Nvidia’s technological ecosystem. The Tokyo-based conglomerate is actively engaged in numerous AI initiatives that heavily depend on Nvidia’s advanced technology, including the ambitious $500 billion Stargate project aimed at developing data centers in the U.S.

Rolf Bulk, an equity research analyst at New Street Research, clarified the broader context of SoftBank’s actions. “This should not be seen, in our view, as a cautious or negative stance on Nvidia, but rather in the context of SoftBank needing at least $30.5bn of capital for investments in the Oct-Dec quarter, including $22.5bn for OpenAI and $6.5bn for Ampere,” Bulk stated. He highlighted that this sum represents “more in a single quarter than it has invested in aggregate over the two prior years combined.”

Dan Baker of Morningstar echoed this sentiment, noting that the move doesn’t signal a fundamental shift in SoftBank’s strategy. “They made a point of saying that it wasn’t any view on NVIDIA. … At the end of the day, they are using the money to invest in other AI related companies,” Baker observed.

Vision Fund’s AI Dominance and OpenAI Expansion

These strategic asset sales, coupled with a remarkable $19 billion gain from SoftBank’s Vision Fund, propelled the company to double its profit in the fiscal second quarter. The Vision Fund has aggressively expanded its footprint across the AI value chain, investing in and acquiring companies spanning chips, large language models, and robotics.

Goto attributed the impressive results to a pivotal investment. “The reason we were able to have this result is because of September last year, that was the first time we invested in OpenAI,” he said. He further noted that OpenAI’s latest valuation of $500 billion ranks among the world’s largest, based on fair value assessments.

Following this significant recapitalization and SoftBank’s substantial $22.5 billion investment, the Japanese firm’s ownership in OpenAI is set to increase from 4% to 11%. Sources suggest that SoftBank might “potentially” further increase its investment in OpenAI, contingent on the company’s performance and future valuation rounds, though they would likely avoid exceeding a 40% equity stake to maintain a non-controlling interest.

Market Volatility and Future Outlook

SoftBank’s shares have experienced recent volatility, reflecting broader market concerns about a potential AI bubble. Despite these fluctuations, CFO Goto reiterated the company’s commitment to maximizing shareholder opportunities. “Our share price recently has been going up and down dynamically … we want to provide as many invest opportunities as possible,” he affirmed, pointing to the company’s recently announced four-for-one stock split as part of this strategy.