The value of shares of the Japanese SoftBank Group reached an all-time high on Thursday, July 4.
Currently, the unit of the mentioned business giant, which specializes in carrying out investment activities in the technology sector, is showing signs of recovery. At the same time, SoftBank Group founder Masayoshi Son found himself in the spotlight after statements about the future of artificial intelligence. According to him, over time, a form of AI will appear that, in terms of cognitive abilities, will significantly exceed the capabilities of the human mind.
Also, the success of the UK chip developer Arm on the public market has become a factor influencing the current performance of SoftBank Group. This is largely a natural relationship since nowadays microcircuits are strategically important products that are actively used in electronics and are also necessary for the training and subsequent functioning of artificial intelligence systems. SoftBank Group is the owner of a majority stake in Arm.
The business giant’s value stocks reached a record high of 11,190.0 Japanese yen on Thursday. This result contrasts significantly with the situations in which SoftBankGroup has found itself in the past and indicates a more optimistic and successful present. In the early 2000s, the business giant was going through a difficult period associated with the dotcom crash. It is worth clarifying that the term dotcom is used concerning companies whose business strategy is entirely based on functioning in the Internet space. The reason for the mentioned collapse was an incorrect assessment of the prospects of the specified firms and their assets. Against this background, an overestimated value of companies has formed. SoftBankGroup also found itself in a difficult situation in 2021-2022, the recent past. In this case, the negative reality for the business giant was formed against the background of problems in the technology market.
Masayoshi Son founded the SoftBank Group in 1981. Initially, the company was engaged in software distribution. In 1994, SoftBank Group went public in Japan. Also in the mentioned decade, the business giant invested $2 million in Yahoo. This decision was made against the background of the so-called Internet boom. Since then, the virtual environment has continued to develop, reaching significant proportions of existence, moving forward in the process of its evolution and actually becoming a new dimension of reality. However, in the late 1990s, the perception of prospects for the Internet turned out to be overly optimistic, which provoked an excessive value of companies associated with this industry. At the same time, it is worth noting that the vision of the virtual environment and its prospectuses of the sample of the end of the last century in a certain sense got ahead of the course of history, but in fact, was not incorrect in the context of a long-term process.
The development of the Internet and Yahoo shaped the pace of development of the SoftBank Group, which allowed the value of shares of the business giant to reach 11,000 yen in February 200.
After the fall of the value of Internet stocks, the brainchild of Masayoshi Son found itself in the space of heavy reality. At some point, the securities of the business giant stepped down by more than 90% below their peak for dotcoms.
Exactly 21 years later, in February 2021, SoftBank Group surpassed the value stocks record. It is worth noting that recently the dynamic of the mentioned indicator has demonstrated volatility. This tendency became noticeable after Masayoshi Son began to position SoftBank Group as a visionary pioneer, launching in 2017 the Vision Fund, a large unit specializing in investing in the technology sector.
The business giant has placed many bets on technology companies around the world. Theoretically and in the context of material realities, this is the right strategy, since the relevant industry is at the stage of active development and has the most positive prospects. At the same time, some bets turned out to be unsuccessful. Such a result is almost inevitable when the quantity indicator becomes almost dominant and when there is interaction with the hypothetical potential of a certain source of activity, and not with specific at least intermediate results of its operation. In the list of unsuccessful bids by the business giant, one of the most famous examples is the US startup WeWork, which provides flexible workspaces. In September 2019, the value of this startup was $ 10 billion, although in January of the same year, the corresponding figure was around $47 billion. The trajectory of the fall, according to the media, has become a reality against the background of a dubious management approach and the so-called easy money from SoftBank Group.
Some of the business giant’s investments in Chinese companies also turned out to be unsuccessful. In this case, the negative result became a reality against the background of the beginning of Beijing’s policy of strict control over the technology sector. The Chinese authorities began to use an appropriate approach at the end of 2020.
In March 2021, the value of SoftBank Group shares reached record highs at that time, but in the same period, these securities found themselves on a downward trajectory amid a difficult period in the global technology sector. In 2022, the Vision Fund faced record financial losses. At that time, Masayoshi Son said that the business giant was switching to the so-called protection mode and would adhere to a more conservative strategy of action as part of its investment operation. In 2023, the Vision Fund reported losses of $32 billion, which became what can be described as a negative record. After that, Masayoshi Son announced the change of the defense strategy to the offensive strategy. Making drastic adjustments to the position of the founder of the SoftBank Group was made because he was impressed by the prospects for investing in the area of artificial intelligence. It is worth noting that AI is indeed a very promising sphere of activity, but there is no guarantee that in this case literally every bet will be a winner. In addition, competition is rapidly increasing in the area of artificial intelligence.
The value of SoftBank Group shares began to move on a trajectory of a gradual recovery in May 2023. Vision Fund is demonstrating an improvement in its financial performance this year. It is worth noting that this dynamic is largely related to the global tendency to recover of securities of technology companies. In the context of the mentioned circumstances, it can be noted that the Vision Fund demonstrates an example of the inevitable impact of the general on the particular. Global processes can be resisted, but the meaning of these efforts causes questions about expediency and justification.
Oliver Matthew, head of Asian consumer research at CLSA, says that Vision Fund had to write down various investments due to a decrease in the cost of equity and tougher conditions in the private financing environment. The expert also noted that the write-down cycle seems to be mostly completed, and there is a chance that the initial public offering (IPO) market of shares in the future will be more constructive, especially for investments related to artificial intelligence.
It is also widely believed among analysts that the growth of SoftBank Group’s value equities by about 78% over the year is the result of the successful IPO of Arm. The business giant owns approximately 90% of the chip manufacturer’s securities. It is worth noting that since the beginning of the current year, the shares of the microcircuits producer have risen in price by almost 124%.
Paul Golding, senior US lifestyle and payments analyst at Macquarie US equity research, says that SoftBank Group’s investment strategy and core business areas have long included the development of artificial intelligence ecosystems. According to the expert, the acquisition of Arm in 2016 provided the business giant with direct exposure to the dynamic semiconductor market and the right to intellectual property related to semiconductor designing, which is significantly ahead of broader progress in the area of using AI and platforms.
Over the years, investors have paid special attention to how accurately SoftBank Group’s valuation reflects the assets to which the company contributes funds or holds. For example, the business giant is currently valued at about $101.5 billion. At the same time, Arm’s market capitalization is around $176 billion. This means that 90% of the shares owned by SoftBank Group are equivalent to about $158 billion of the mentioned amount.
Dan Baker, senior equity analyst at Morningstar, says that a lot of SoftBank’s price appreciation is coming down to Arm. The expert is not sure that investors were again convinced by the story of the business giant.
Investors also welcomed the fact that SoftBank Group sold almost all of its shares in Alibaba, the Chinese e-commerce giant that Masayoshi Son supported in 2000.
SoftBank Group has also likely been helped by a broader rise in Japanese stocks. For example, the Nikkei 225 Index is up 22% in the current year.
