SoftBank Reports $1.6 Billion Q3 Profit

• SoftBank has invested over $30 billion in OpenAI, generating a 2.8 trillion yen ($18.3 billion) investment gain in the nine months ending December 2024
• To fund its OpenAI investments, SoftBank has sold major assets including its $5.8 billion Nvidia stake and $12.73 billion worth of T-Mobile shares between June and December 2024
• OpenAI faces mounting challenges with rising costs to train and run AI models amid intensifying competition from rivals like Alphabet, while remaining unprofitable

SoftBank Reports $1.6 Billion Q3 Profit on OpenAI Investment Gains

Key Financial Results:

SoftBank Group reported a net profit of 248.6 billion yen ($1.62 billion) for Q3 (October-December), marking its fourth consecutive profitable quarter. This represents a significant turnaround from a 369 billion yen net loss in the same period last year.

OpenAI Investment Impact:

The company's earnings were primarily driven by rising valuations of its ChatGPT-maker OpenAI stake. OpenAI delivered investment gains totaling 2.8 trillion yen over the nine months ending December, though Q3 gains were smaller than the previous quarter. SoftBank has now invested over $30 billion in OpenAI, building a substantial position in the unprofitable AI firm.

Funding Strategy:

To finance its aggressive OpenAI investments, SoftBank has undertaken significant asset sales including:

• $5.8 billion Nvidia holding (sold between June-December 2023)
• $12.73 billion partial T-Mobile stake sale (same period)
• Bond issuances and loans backed by holdings like chip designer Arm
• Increased borrowing capacity against its assets in December

Market Concerns:

Investor anxiety is growing over SoftBank's ability to continue funding OpenAI, which remains unprofitable. OpenAI faces rising training and operational costs amid intensifying competition from rivals like Alphabet. While once the dominant large language model player, OpenAI's competitive position is being challenged.

Outlook:

The technology investment group's heavy reliance on OpenAI valuation gains and aggressive asset monetization strategy raises questions about sustainability and portfolio diversification.