SoftBank Group Corp. has sold its entire stake in Nvidia Corp., securing a profit of $5.8 billion as founder Masayoshi Son prepares for a new wave of investments designed to build a global AI ecosystem.
The Tokyo-based conglomerate had boosted its Nvidia holdings to around $3 billion by March, and the windfall from the sale—combined with strong returns from its Vision Fund—helped SoftBank deliver a surprise ¥2.5 trillion ($16.2 billion) net income for the fiscal second quarter. This result far exceeded analyst projections of ¥418.2 billion. Reflecting confidence in its growth trajectory, SoftBank also announced a 4-for-1 stock split effective January 1, aimed at increasing participation among retail investors.
Now, at 68, Masayoshi Son is positioning SoftBank at the forefront of the AI revolution. The company’s portfolio includes major stakes in OpenAI and Oracle Corp., both of which have surged amid growing enterprise demand for AI solutions. Consequently, SoftBank’s shares climbed 78% in the three months ending in September—its strongest performance since 2005.
Analysts remain upbeat. Citigroup’s Keiichi Yoneshima raised his target price for SoftBank shares to ¥27,100, citing the soaring valuation of OpenAI, which he predicts could hit $500 billion to $1 trillion in the near future.
Son’s next major investments include a $30 billion commitment to OpenAI, a $20 billion AI data center project called Stargate, and discussions with TSMC to participate in a $1 trillion AI manufacturing hub in Arizona. Additionally, SoftBank has explored acquiring Marvell Technology and plans to spend $6.5 billion to acquire Ampere Computing. However, the company faces challenges in funding these massive ventures and managing risks tied to inflated AI valuations. Analysts warn that SoftBank’s impressive rally may have already priced in much of the potential upside.
As Finimize Research noted on Smartkarma, “SoftBank was once a cheap way to gain exposure to Arm and the AI boom—but with valuations stretched and the discount gone, it may be time to book profits.”
CEO Jensen Huang has pushed back against comparisons to the dot-com era, asserting that “artificial intelligence isn’t a bubble.” Nvidia has already secured $500 billion in AI chip orders over the next five quarters, underscoring its dominance. With a market capitalization of $4.83 trillion, Nvidia’s valuation now exceeds Germany’s 2024 GDP, fueling debate over how much higher it can climb.
Despite its massive scale, Nvidia continues to post startup-level growth. Fiscal second-quarter revenue jumped 56% year-on-year to $46.7 billion, driven largely by the company’s expanding data center business and its Blackwell AI chips. Nvidia’s gross margin of 72% even surpasses software giants like Microsoft, supported by its proprietary CUDA ecosystem, which locks developers into its hardware and software framework.
However, risks are beginning to surface. Big Tech companies, including Alphabet, Meta, Microsoft, and Amazon, collectively spent over $360 billion in the past year, much of it on Nvidia infrastructure. If the generative AI wave fails to yield profits, such aggressive spending could slow sharply. An MIT study found that 95% of AI projects fail to generate tangible value, while reports indicate that OpenAI lost over $11 billion due to high operating costs.
Analysts agree that Nvidia remains a growth powerhouse, but they caution that its valuation is increasingly stretched and heavily tied to the future of generative AI. Experts at Motley Fool Stock Advisor noted that while Nvidia’s valuation appears justified by its exceptional growth and profitability, its dependence on the AI spending boom introduces significant risk. If corporate investment slows or AI’s commercial promise weakens, Nvidia’s earnings could stagnate. Ultimately, while the company’s fundamentals remain robust, its performance now depends on sustained global AI demand. For cautious investors, analysts suggest it may be wiser to wait and watch rather than enter at current levels.
