SoftBank’s Shares Dive After Nvidia Sale Spooks AI-Wary Market

SoftBank Group Corp.'s stock slid as much as 10% after the tech investor's exit from AI sector leader Nvidia Corp. spooked investors already nervous about climbing tech sector valuations.

The Japanese company's shares touched a one-month low during early morning trading in Tokyo. That's after SoftBank on Tuesday disclosed it had sold its entire stake in Nvidia Corp. for $5.83 billion to help bankroll AI investments. The fall came despite better-than-projected quarterly results from SoftBank, which also disclosed a 4-for-1 stock split. 

SoftBank's Nvidia exit coincides with a growing debate about whether spending by big tech firms like Meta Platforms Inc. and Alphabet Inc. — expected to surpass $1 trillion in coming years — will produce commensurate returns. Investors have begun to question the amount of capital pouring into a technology with uncertain returns, and outsized gains in most of the companies considered frontrunners in that race to build and develop AI. Nvidia's shares slid as much as 3.9% in US trading, after climbing 48% this year through Monday's close. 

SoftBank founder Masayoshi Son has been unwinding positions to pay for a plethora of AI projects, including Stargate data centers with OpenAI and Oracle Corp. 

“The value of the company fluctuates on the market's assessment of the value of its investments, so we think the shares are likely to prove to be highly volatile up ahead,” Citigroup analyst Keiichi Yoneshima wrote in a note. “But with NAV on an expansionary trajectory, we think investors will warm to the shares.”

His company is keen to become a leading player in that growing ecosystem, with plans to leverage stakes in sector linchpins from OpenAI to US chip designer Ampere Computing LLC. On Tuesday, SoftBank executives sidestepped questions about whether the industry is fomenting an AI investment bubble, and said the sale had nothing to do with Nvidia itself but was a necessary financing measure.

“I can't say if we're in an AI bubble or not,” Chief Financial Officer Yoshimitsu Goto said during an earnings conference. SoftBank sold Nvidia “so that the capital can be utilized for our financing,” he added, without elaborating.

SoftBank has sold out of Nvidia once before, in 2019. The company resumed buying small stakes in Nvidia in 2020 — two years before the advent of ChatGPT ignited a historic rally. It disclosed that it increased its stake in the US chipmaker to around $3 billion at the end of March. It's done well just on that measure: Nvidia has gained more than $2 trillion of market value since.

That rally, along with its investment in OpenAI, helped prop up SoftBank's bottom line. The Japanese company reported a surprise net income of ¥2.5 trillion ($16.2 billion) in its fiscal second quarter, far outrunning the average of analyst estimates of ¥418.2 billion. OpenAI's value has risen $14.6 billion since SoftBank invested, Goto said.