SoftBank invests most in four quarters, restarts ‘careful’ investments with focus on AI

SoftBank has returned to investments

SoftBank Group Corp invested the most in four quarters, transitioning its strategy from a defensive to an offensive approach with an increased focus on artificial intelligence (AI) amid a rebound in shares of technology companies globally.

SoftBank, on a group level, invested $1.8 billion in the three months to June, most since April-June last year, when it invested about $2.5 billion, its Chief Financial Officer, Yoshimitsu Goto said during the earnings presentation on August 8.

Through the company’s Vision Fund Unit, which includes the two Vision Funds and one Latin America Fund, SoftBank invested $900 million, more than two times compared to the same quarter of last year, when it invested about $400 million.

“We have been carefully, carefully restarting our investment activities. I hope you get the sensitivity here that we are carefully and slowly moving back to investment activities,” said Goto.

“The investments that we have done so far, have been selectively considered and at the same time with a focus on the AI trend. For future growth, we would like to start having a good relationship with those companies that we hope are the future of the group,” he added.

Goto's talk commenced with a slide labelled "signs of change," where he delved into the surge observed in technology stocks recently. This surge brought about a reason for celebration at SoftBank, known for its investments in tech enterprises. Another slide, titled "shifting to offence," was presented. Nevertheless, Goto's demeanour did not exude a high level of confidence as he continued saying that the company would take a very careful approach when it comes to investments.

Goto also emphasised how SoftBank’s portfolio companies across sectors such as frontier tech, edtech, health tech, logistics, proptech and fintech among others, could potentially use generative AI. For instance, he said Delhivery, a logistics unicorn, could use generative AI for route optimisation.

SoftBank's positive outlook on AI and the gradual resurgence of investor interest are set to ignite hope within the realm of Indian startups. This resurgence hints at the potential return of one of the country's most assertive late-stage investors, which had refrained from investments for a span of 15 months.

India stands as SoftBank's third-largest market, trailing only the US and China. Nonetheless, Navneet Govil, a top executive in the Vision Funds unit, emphasised that the bar for investment is “very high.”

SoftBank, one of the most active tech investors in the world, has been reporting a loss for three consecutive quarters. However, its loss narrowed significantly in the June quarter to $3.3 billion, thanks to its Vision Fund investment unit, through which it makes investments in high-growth technology companies across the globe, making a gain on investments during the period, for the first time after five quarters.

Between the two segments of the Vision Fund investment units, the fair valuation of SoftBank's portfolio companies listed on the market rose from $24.9 billion as of March 31, 2023, to reach $25.4 billion by the close of the June quarter.

Concurrently, the fair value of SoftBank's private portfolio companies, which constitute a substantial portion of their investments, witnessed a marginal increase to $61.3 billion by June 30, as opposed to $60.5 billion in the previous quarter.

While SoftBank has not participated in any investments in India this year, the Japanese investor has been paring stakes in public companies like Paytm (One97 Communications) and private startups like Lenskart.

In fact, Paytm, one of SoftBank's biggest investments in India, turned breakeven for the Japanese investor, for the first time since its listing in November 2021 following a sharp rally in its stock, Moneycontrol reported in July. SoftBank is also looking at paring its stake in food tech unicorn Zomato via open-market transactions, thanks to the company's share price also rising due to improved financial performance.