SoftBank Swings to $7 Billion Quarterly Loss as Tech Sell-Off Weighs on Its Holdings

The loss for July to September was worse than any forecast from the three analysts polled by LSEG, according to Reuters. Their estimates ranged from a profit of 233 billion yen to a loss of 113 billion yen. Revenue was stronger than expected, at 2.22 trillion yen against an LSEG estimate of 2.02 trillion yen, CNBC reported.

The result matters because of OpenAI. In October SoftBank completed a $30 billion follow-on investment in the ChatGPT maker, taking its total investment to $64.6 billion and its stake to about 13%. Reuters noted that the year-earlier profit came mainly from a large gain on that stake. The size of the holding has raised questions about how well SoftBank can absorb setbacks in the AI sector. First reports did not say how much of the quarter's loss came from the Vision Fund, the OpenAI stake or other investments.

SoftBank's earnings swing widely from one quarter to the next because they depend largely on the changing value of its stakes in listed and private companies. Reuters called them volatile and difficult to predict.

The shares had a strong day before the results came out. They closed 13.9% higher in Tokyo on Tuesday, as Asian technology stocks including Samsung Electronics and SK Hynix rose after Wall Street rebounded overnight. Even after that gain, the stock has almost halved since the start of June, in line with other AI stocks, Reuters reported.

Reuters linked the pressure on AI stocks to two things. The Democratic Party's sweeping win in the US midterm elections has raised expectations of tighter regulatory scrutiny of AI. Separately, Nvidia's shares have been hit by reports that the FBI is looking into chief executive Jensen Huang over an alleged affair with a Chinese businesswoman suspected of spying for Beijing. SoftBank was once a major Nvidia shareholder but no longer holds a stake.

The company is still putting money into AI infrastructure. On Monday, before the earnings release, SoftBank Group announced plans with Grab and Malaysia's PETROS to commit a combined $1.85 billion in initial capital to AI infrastructure in Malaysia. The partners have a long-term target of at least five gigawatts of AI computing capacity in the country.

The Malaysia plan follows the heavy spending on OpenAI and data centres that made SoftBank one of the most leveraged ways to invest in AI. The next big test for the stake is any change in OpenAI's valuation in its continuing fundraising.