SoftBank's AI investment spree to be in focus on at Q1 earnings
Analysts and investors are keen for updates on how they will be financed, the timeline for returns to materialise and whether assets will be sold to fund the new projects.
SoftBank has embarked on its biggest spending spree since the launch of its Vision Funds in 2017 and 2019.
It is leading a $40 billion funding round for ChatGPT maker OpenAI. SoftBank has until the end of the year to fund its $22.5 billion portion, although the remainder has been subscribed, according to a source familiar with the matter.
It is also leading the financing for the Stargate project - a $500 billion scheme to develop data centres in the United States, part of its effort to position itself as the "organiser of the industry," founder Masayoshi Son said in June.
SoftBank has yet to release details on what kinds of returns its financing of the Stargate project could generate. The extent of third-party investment will determine what other financing tools, such as bank loans and debt issuance, it may have to deploy.
In July, SoftBank raised $4.8 billion by selling off a portion of its holding in T-Mobile (TMUS.O), opens new tab.
"If other sources of capital are less supportive, SoftBank could look to asset-backed finance, which is collateralised by equity in other holdings," Macquarie analyst Paul Golding said.
The Japanese conglomerate is expected to post a net profit of 127.6 billion yen ($865 million) in the April-June quarter, according to the average estimate of three analysts polled by LSEG.
That would mark SoftBank's second consecutive quarter of profit and follow its first annual profit in four years when it was helped by a strong performance by its telecom holdings and higher valuations for its later-stage startups.
Its results are, however, typically very volatile and difficult to estimate due to manifold investments, many of which are not listed.
SoftBank's performance in exiting from investments and distributing profits has been patchy of late. The Vision Funds had made a cumulative investment loss of $475 million as of end-March.
That said, 13 of 18 analysts have a "buy" or "strong buy" rating for SoftBank's stock, according to LSEG.
Although there is some concern in the market that AI-related valuations have become bubbly, they continue to climb.
OpenAI is in early-stage discussions about a stock sale that would allow employees to cash out and could value the company at about $500 billion, according to the source - a huge jump from its current valuation of $300 billion.
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