Masayoshi Son made $72 billion betting on Jack Ma's Alibaba. Now he wants to do it again with AI.

• Masayoshi Son has spent recent years unwinding his multi-billion dollar stake in Alibaba.
• The SoftBank CEO is betting everything on the success of AI.
• Chip designer Arm's success will embolden him, but problems remain with the Vision Funds.

Masayoshi Son owes much of his success to an incredibly prescient dot-com era bet on Alibaba.

The SoftBank chief first invested $20 million in Jack Ma's ecommerce upstart in 2000, when it was just a year old. Son continued to back Ma as Alibaba blossomed into China's answer to Amazon.

That faith was handsomely rewarded, with SoftBank realizing an incredible $72 billion gain on its investments in Alibaba over the course of 23 years.

But Son's late-stage success will have to come from somewhere else. The 66-year-old has spent the past few years unwinding SoftBank's stake in Alibaba to effectively zero.

Limiting risks to a China crackdown on corporates, a need for cash after posting an annual loss last year of over $32 billion, and the wider economic turmoil triggered by soaring inflation and interest rates all pushed Son’s Japanese conglomerate to let go of its cash cow in 2023.

Fortunately for Son, the time seems to have finally arrived for one of his most long-standing interests to take off: artificial intelligence.

Life after Alibaba

While SoftBank’s position in Alibaba has receded, it has made AI its overwhelming focus at a moment when ChatGPT has triggered a frenzy around AI.

Son has gone as far as suggesting that AI will be more intelligent than humans and likened anyone who doubts its potential to a “goldfish.”

CFO Yoshimitsu Goto doubled down on the AI focus when SoftBank reported its third-quarter earnings on Thursday: “We have moved from Alibaba, and are focused on leading the AI revolution.” 

Its efforts to do this rest on two pillars that got started in the 2010s: its $32 billion acquisition of chip designer Arm, and the formation of the world’s largest venture capital investment vehicles, the Vision Funds.

Success has been mixed so far.

Arm, a British chip firm whose designs are used by everyone from Apple and Google to Nvidia and Samsung, enjoyed a blockbuster Nasdaq listing in September as it sought to grow and meet rising demand for AI chips. 

SoftBank, which still owns a 90% stake in Arm following its IPO, turned its first profit in five quarters after announcing 950 billion yen (about $6.4 billion) in net income for the final three months of 2023 off the back of strong interest in the chip firm. 

Arm, which reported its earnings on Wednesday, posted a 14% year-on-year increase in revenue to $824 million for the quarter, sending its value close to a record high of $117 billion. It was listed in September at roughly $55 billion.

Replicating Arm's success

Matching Arm’s big wins has been harder to do with SoftBank's startup betting efforts.

The Vision Funds, headquartered in London, have been fueled by sovereign wealth fund money from the Middle East as well as SoftBank’s own cash to identify early-stage companies that can play a huge role in the AI revolution.

Some of its biggest investments have included Uber, TikTok parent company ByteDance, and Nvidia, which it prematurely sold out of in 2019. 

Though the funds made $4 billion in gains over the past three months — a period in which VC funding broadly has been down — markdowns on over-valued companies and limited exit opportunities have left them with a cumulative loss of $2 billion as of December 31. 

That said, it’s a position that SoftBank is quietly confident about reversing. Its portfolio companies are taking a more efficient approach to growth after years of a growth-at-all-costs mindset, and are racing to integrate AI in any way they can. 

SoftBank is also actively seeking out new investment opportunities in companies across the AI spectrum as it seeks out any business trying to be the next OpenAI, Anthropic, or Cohere. 

Though SoftBank is yet to make an investment in a large language model player, Business Insider understands Son has had conversations with OpenAI boss Sam Altman.

Arm and the Vision Funds collectively represent 70% of SoftBank’s net asset value, a key performance indicator that reflects the total value of its holdings. That’s up from 21% at the end of 2019, when Alibaba represented 50% of net asset value. 

For Son to emulate his early career success, he'll likely need both pillars to perform.

Arm, SoftBank's latest golden child, is on course to deliver, but there is still much work to be done to get the Vision Funds back on track.