SoftBank is betting on AI and an IPO revival after swinging to a $7.7 billion profit
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- SoftBank reported a $7.7 billion quarterly profit on Tuesday after a loss last year.
- Gains in its tech bets come as it prepares to invest further in AI and eyes future IPOs.
- SoftBank Vision Fund's CFO told BI that "macro tailwinds" helped its public portfolio.
SoftBank's bets on AI and timely public listings have helped it post its biggest profits for two years, a year after posting losses in the billions.
The Japanese technology conglomerate swung to a 1.18 trillion yen ($7.7 billion) profit on Tuesday. For the same period last year it reported a 931.1 billion yen ($6 billion) loss.
Masayoshi Son's company — once associated with its notorious failed bet on WeWork and other lossmaking startups — pointed to gains made across its Vision Funds, its huge investment vehicles with both public and private holdings in tech companies.
Gains for its Vision Fund 1, a $98.6 billion investment vehicle launched in 2016 with backing from Abu Dhabi and Saudi Arabia's sovereign wealth funds, totaled $3 billion in the second quarter. It reported strong performances in listed companies in its portfolio, such as Didi Chuxing, a Chinese version of Uber.
Navneet Govil, chief financial officer at SoftBank's Vision Funds, told Business Insider that "macro tailwinds" such as US interest rate cuts and stimulus measures in China helped its public portfolio.
Vision Fund 2, which made a $500 million investment in OpenAI last month, made a $900 million investment gain in the quarter due to growth in privately held portfolio companies such as Revolut.
The UK-based fintech giant, which has won banking licenses in the UK and Mexico in recent months, is now valued at $45 billion. SoftBank invested in Revolt in 2021, when it was worth $33 billion.
Tailwinds for IPO activity
Listings in India of companies like Ola Electric have also provided a boost for SoftBank.
Govil said SoftBank saw opportunities to realize future gains from IPOs after a period of stagnancy, adding that "rate cuts in the US and elsewhere are constructive developments because they effectively lower the cost of capital and provide a good tailwind for IPO activity."
He continued: "We have a late-stage portfolio that's now valued at about $34 billion and some really high-quality companies which are leaders in their respected industries, from ByteDance to PayPay to Fanatics. They will all list when the time is right."
Despite the investment gain, Vision Fund 2 has lost an overall total of $21 billion since its inception. The fund has been forced to grapple with a tougher interest rate environment in recent years and a slow IPO market.
The results come as SoftBank gears up for a huge investment spree in AI to realize Son's ambitious vision. Last month at SoftBank World — its annual customer event — the founder and CEO said he hoped to achieve "artificial superintelligence" within a decade.
The 67-year-old Son, who made his original fortune with a timely bet on Alibaba, is hoping to create outsize returns in the generative AI era. He has already bet on buzzy companies such as Perplexity and chip firms trying to rival Nvidia, such as Graphcore and Arm.