SoftBank Group is gearing up for a substantial commitment to artificial intelligence, with plans to invest nearly $9 billion annually in AI ventures, the Financial Times has reported.
This bold move is part of a broader strategy that could redefine the company’s future, as founder Masayoshi Son seeks to position SoftBank at the forefront of the next technological revolution.
Over the past year, SoftBank’s expenditures on investments and commitments have surged to $8.9 billion. This sharp increase comes after Son’s declaration that the company was ready to launch a “counteroffensive” in the tech world. Now, SoftBank is prepared to sustain or even exceed this level of investment for major opportunities that align with its strategic goals.
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Yoshimitsu Goto, SoftBank’s Chief Financial Officer, noted the company’s readiness to escalate its AI investment activities.
“We will, in principle, be keeping the same kind of trend in terms of the pace of investment activities,” Goto told the Financial Times. “From now on, we want to step up investments in AI companies. The reason we’ve been keeping our balance sheet at a very safe level is because we would like to be prepared and flexible if there is anything that we would like to move on.”
Masayoshi Son has a history of transforming SoftBank, initially from an internet broadband business to a major player in the telecom industry through acquisitions like Vodafone Japan and Sprint. He then shifted gears, turning SoftBank into a tech investment powerhouse with significant backing from entities such as Saudi Arabia and Abu Dhabi. Notably, SoftBank’s investment in Alibaba was a tremendous success, significantly boosting the group’s profile and financial strength.
Son’s vision is now firmly focused on AI, which he believes will drive future growth. However, SoftBank faces intense competition from tech giants like Microsoft, Amazon, and Google. Microsoft, in particular, has made substantial investments in AI, including a notable $13 billion partnership with OpenAI, the organization behind the cutting-edge GPT-4 language model. This has positioned Microsoft as a leader in AI innovation and commercialization.
Despite these competitive pressures, SoftBank is undeterred. Its recent financial recovery, marked by an upgrade from rating agency S&P to double B plus, reflects an “improvement in asset quality” and gives the company the capacity to engage in large-scale deals. Nevertheless, Goto stressed fiscal prudence.
“That [strength] doesn’t mean that we are ready to spend $10 billion, $20 billion, $30 billion… that’s not something that we expect to come out from our balance sheet,” he said.
SoftBank’s deal-making momentum is already evident. This month, the company led an investment of over $1 billion into the UK self-driving car startup Wayve, marking Europe’s largest AI deal to date. Son’s direct involvement underscored the importance of this investment.
Goto has highlighted several sectors ripe for AI investment, including power generation and data centers, which are crucial for supporting AI infrastructure. However, he declined to comment on reports about SoftBank’s potential interest in producing an AI chip or its discussions to acquire another UK chip designer, Graphcore.
Son is expected to provide more details about his AI strategy at SoftBank’s annual shareholders’ meeting in June. This could address some investors’ concerns about the group’s focus potentially straying from its core businesses, such as Arm and its telecom subsidiary, SoftBank Corporation.
A Tokyo-based long-term investor expressed some skepticism about SoftBank’s aggressive AI push.
“If you look at their investments, the volatility is such that whether they do $10 billion or $20 billion doesn’t matter… and it will be all or nothing if they go in on AI chips. Yes, they have Arm and they can write big cheques, but moving from planning to execution is not going to be easy,” he said.
Within SoftBank, significant organizational changes are underway. The Vision Funds are transitioning from making new investments to focusing on exits that deliver returns, leading to billions of dollars in sales over the past year. This shift is part of a broader integration, with the Vision Funds increasingly operating under the SoftBank umbrella rather than as separate entities. This change is driven in part by the fact that most remaining investment capital in the second Vision Fund is Son’s personal money.
To streamline AI investments, SoftBank created the Platform Group, comprising Vision Funds advisers who scout for AI opportunities. These investments are strategically financed through SoftBank’s balance sheet, reflecting a long-term commitment rather than a focus on short-term returns.
Alex Clavel, co-chief executive of SoftBank’s Vision Funds, articulated this integrated approach saying: “We’ve actually merged and call our international businesses ‘One SoftBank’ internally as a way to remind ourselves that look, the goal is bringing money home.”
SoftBank’s new aim at AI investments sets the stage for a new era of competition in the tech sector. With Microsoft leading the charge with its substantial investments and SoftBank poised to make significant moves, the race to dominate the AI industry is intensifying. This is expected to usher in a period of dynamic growth and innovation, increasing the volume of investment in AI, and shaping the future of technology and its applications across industries.