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SoftBank sells off Vision Fund assets as it pivots to AI, chips

SoftBank Group’s flagship Vision Fund has been quietly divesting or devaluing billions of dollars worth of its publicly traded holdings in recent years. This reflects founder Masayoshi Son’s transition from venture capital deals to strategic investments in semiconductors and artificial intelligence (AI). 

Since the end of 2021, the world’s largest start-up fund has witnessed a significant reduction in its US-listed portfolio, amounting to nearly US$29 billion (S$39 billion). This reduction occurred through the selling off of stakes in companies like Coupang, DoorDash, and Grab Holdings, alongside declines in share prices, as revealed in regulatory filings. 

However, this amount doesn’t account for the Vision Fund’s disposal of its stake in chip designer Arm Holdings to SoftBank last year. As a consequence of these changes, the once-dominant tech powerhouse has downsized its workforce by over a hundred employees and has drastically slowed down its rate of new investments.

According to sources familiar with Masayoshi Son’s plans, he is divesting assets from the Vision Fund’s portfolio to prepare for potential ventures in AI and related hardware. SoftBank’s equity capital market team has been key in liquidating the Vision Fund’s substantial stakes while causing minimal market disruption.

Many of Son’s recent investments bypass the Vision Fund altogether and are managed directly by the holding company. Despite previous discussions about launching new Vision Funds every few years, the idea of a third or fourth fund is no longer on the table.

As a result, the Vision Fund’s reduced workforce primarily serves in a caretaking capacity. The equity capital market team focuses on identifying optimal moments for asset sales, sometimes executing block trades on secondary markets. Their primary goal is to secure investment gains and mitigate any losses.

Masayoshi Son has shifted his focus to new interests, partly influenced by the success of Arm. Arm’s market value has skyrocketed to approximately $106 billion since its market debut, surpassing the total value of SoftBank’s 90% ownership in the company.

One potential project on Son’s agenda involves funding a $100 billion chip venture aimed at competing with Nvidia and supplying semiconductors for AI services. However, the specifics of Son’s plans are still uncertain.

SoftBank’s strategic pivot also mirrors changes in the wider venture capital landscape. The Vision Funds and Latin America funds collectively managed over $160 billion, the largest pool of start-up capital ever amassed. Initially, staff focused on identifying promising companies requiring investments of at least $100 million—more than many start-ups desired or could efficiently utilize.

However, in recent months, SoftBank has begun directly investing in strategically significant companies, sometimes acquiring controlling interests. For instance, the firm is reportedly in discussions to acquire British semiconductor startup Graphcore. Additionally, SoftBank recently led a $1.05 billion funding round for UK self-driving startup Wayve Technologies, alongside Nvidia and existing investor Microsoft.

Vision Fund a prolific seller

According to the company’s earnings reports, for six of the past seven quarters, the Vision Fund has sold off more assets than it has invested in. In the December quarter alone, the Vision Fund divested $2.2 billion of its assets while only spending $90 million on investments.

This trend has contributed to an increase in SoftBank’s cash reserves, which now stand at 6.2 trillion yen, up from 4.6 trillion yen at the end of 2021. Although the second Vision Fund still has around $6 billion available for investment, sources familiar with the fund’s management indicate that Masayoshi Son effectively controls the allocation of these funds, as the second Vision Fund operates without external partners.

Analyst Kirk Boodry from Astris Advisory estimates that the two Vision Funds collectively sold off at least $6 billion worth of their holdings in the fiscal year ending March.

“The Vision Fund has been a prolific seller since September,” he said. “A growing cash pile could point to a deeper pivot to generative AI.”

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BRL Editor
BRL Editorhttps://businessreviewlive.com
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