Pushing back against doubts! SoftBank's Q4 profits greatly exceed expectations, with OpenAI contributing $25 billion in revenue.

SoftBank Group (SFTBY.US) announced a significant increase in profit in the fourth quarter, mainly due to the increase in valuation of its investment in OpenAI. This performance has also strengthened SoftBank's confidence in further increasing its bet on this ChatGPT developer. Amidst the turmoil in the Middle East affecting global markets, OpenAI becomes a profit pillar for SoftBank. Data shows that SoftBank's net profit for the fourth quarter was 1.83 trillion yen (approximately $11.6 billion), higher than analysts' average expectation of 295.2 billion yen. Bloomberg Intelligence analyst Kirk Boodry stated that this performance may be attributed to the $25 billion valuation gain that SoftBank received from its investment in OpenAI during the quarter. In the backdrop of global market turbulence due to the events in the Middle East, this Japanese technology conglomerate's other investment portfolio performance was average, while the investment returns from OpenAI stood out. This also indicates that SoftBank's reliance on this American startup is continuing to increase. Currently, OpenAI is facing fierce competition from rivals like Anthropic and Alphabet Inc. Class C, and reports suggest that its performance has not been able to reach the internal set highest target. SoftBank founder Masayoshi Son has been reducing assets and taking on large debts to further focus on the artificial intelligence race. The company obtained a $40 billion bridge loan in March and announced ambitious plans, including investing billions of dollars in the data center field. Since SoftBank's initial investment in OpenAI at a valuation of $157 billion, the valuation of this American startup has soared to $852 billion. SoftBank has pledged to increase its total investment in OpenAI to $64.6 billion by the end of this year. Richard Kaye, Joint Head of Japanese Equity Strategy at Comgest Asset Management, said, "SoftBank's investment performance has been consistently strong, perhaps even better than people generally realize." Kaye mentioned that SoftBank's business is also supported by other assets, including chip design company Arm Holdings Plc and Japanese telecom subsidiaries. SoftBank holds around 90% of Arm's shares, and Arm's stock price rose by 38% in the March quarter. He said, "It is very difficult for any global tech company to diversify investment among various parties in competition. In this regard, SoftBank is no exception." SoftBank's Vision Fund, holding shares in OpenAI, reported investment returns of 3.08 trillion yen. During this period, the stock prices of major listed companies in SoftBank's portfolio, including Coupang Inc. and Grab Holdings Ltd., fell significantly. Majority of the companies in SoftBank's Vision Fund investment portfolio are private, which poses some difficulty for analysts in forecasting. Unfazed by controversy, SoftBank is fully committed to the AI race. Despite continuous external disputes and doubts, SoftBank's steps in the AI race are not slowing down. Both Arm and SoftBank's mobile business division are expanding into AI hardware business. Arm plans to sell its own chips, while SoftBank's wireless business division plans to enter the new cloud domain and produce batteries designed specifically for AI data centers. Reports indicate that SoftBank Group is preparing to establish the AI company Siasun Robot & Automation, Roze, and may push for the company's listing in the U.S. Sun and French President Macron held talks on a grand AI data center project in France to be announced in the coming weeks. Additionally, recent reports suggest that SoftBank Group in Japan has recently invested over $450 million in the UK AI chip and system development company Graphcore, to continue expanding its AI infrastructure. Graphcore was previously seen as a potential challenger to NVIDIA Corporation, although despite previous cumulative funding reaching hundreds of millions of dollars, the company has yet to achieve large-scale commercial success. Sun has previously stated that Graphcore is a company with deep technical expertise in chip development. These projects will increase financial pressure on SoftBank, as the company is currently facing resistance in debt financing. Earlier reports stated that SoftBank's collateralized loan financing plan against its OpenAI shares was significantly reduced by 40%, from the original target of $10 billion to $6 billion, after facing opposition from some creditors. SoftBank's massive investments in AI, coupled with the ever-increasing debt burden for these investments, have made market observers uneasy. In March of this year, S&P Global, Inc. downgraded SoftBank's credit outlook from "stable" to "negative," citing concerns that its investment in OpenAI may undermine the liquidity and asset credit quality of this Japanese company.