Author: Zhang Yaqi, Wall Street Watch

SoftBank Group recorded its first quarterly net loss in nearly two years, mainly due to massive impairments in its US data center projects, coupled with a general decline in technology stock valuations impacting its investment portfolio, raising doubts about the sustainability of the AI boom, which is now reflected in tangible financial costs.

On Tuesday, SoftBank announced that the net loss for the second quarter of the fiscal year ending September 30 reached 1.12 trillion yen (approximately $7.1 billion), a stark contrast to the market's expectation of a profit of 129 billion yen, while the same period last year saw a net profit of 2.5 trillion yen. The loss was primarily due to a write-off of a non-refundable advance payment of approximately $3.7 billion (59.725 billion yen) the company had made for the procurement plan of power supply equipment at its data center campus in Ohio, USA.

This earnings shock has raised market vigilance regarding the risks of SoftBank's AI strategy. The company's stock price has dropped over 50% since its June peak, with concerns about regulatory tightening following the Democratic Party's significant victory in the US midterm elections, along with the financial pressure accumulated by founder Masayoshi Son's heavy indebtedness tied to AI bets, creating continued suppression.

Despite announcing worse-than-expected loss data, SoftBank's stock price rose 13.9% on Tuesday, mainly because of a rebound in the overall Asian technology sector mirroring the recovery in US stocks.

The core of this loss lies in significant changes to SoftBank's procurement arrangements for its US AI data center projects. During the first half of the fiscal year ending September 30, the company recognized a total loss of 59.725 billion yen due to "revisions" to its procurement plan for power supply equipment at its AI data center projects in the US, which include advance payments made to secure equipment and capacity that are non-recoverable.

SoftBank positions itself as a key player in large-scale AI infrastructure development, with the Ohio data center campus representing a concrete manifestation of its ambitions. However, there remains considerable uncertainty between the preemptive investment in AI infrastructure and actual rollout, which has directly translated into financial losses.

SoftBank's flagship Vision Fund also faced significant pressure this quarter. The Vision Fund segment posted a loss of 81.6 billion yen this quarter, whereas it had recorded a profit of 2.38 trillion yen in the same period last year, with the market originally expecting this segment to remain profitable.

Structurally, Vision Fund 1 recorded an investment loss of 3.86 billion yen due to falling stock prices of listed holdings such as Coupang and Grab, despite its holdings in ByteDance contributing approximately $1.3 billion in paper gains. Vision Fund 2 reported investment income of 89.26 billion yen, but the total investment income for the entire Vision Fund segment was only 85.45 billion yen, a significant decrease from 2.81 trillion yen in the same period last year.

Declines in the stock prices of chip giants Arm Holdings and Intel, as well as a valuation drop for the South Korean e-commerce platform Coupang, further eroded SoftBank's overall earnings.

OpenAI is the core target of SoftBank's AI strategy. As of the end of September, SoftBank's total investment in OpenAI reached $54.6 billion, corresponding to a fair value of $99.6 billion, with cumulative investment gains of about $45 billion. The company stated that the fair value of its OpenAI holdings has remained unchanged since March this year.

However, the overall valuation of AI unicorns is undergoing a repricing. According to Bloomberg, OpenAI ultimately completed a financing round of about $11 billion at a valuation of $1.25 trillion, lower than the previously sought valuation of $1.4 trillion and $30 billion in financing. At the same time, Anthropic's valuation was once reduced to $1.1 trillion, far below the previously rumored $2 trillion.

The pressure on the financing side cannot be ignored either. SoftBank's overall financing costs surged to 461.9 billion yen this quarter, sourced from margin loans secured by its Arm holdings, large bond issuances, and a general rise in financing rates. Masayoshi Son's reliance on the debt market to provide ammunition for AI investments has made SoftBank bonds highly sensitive to market sentiment, with its credit default swap (CDS) spreads rising to multi-year highs.

In addition to internal financial pressures, SoftBank also faced multiple external headwinds this quarter.

The Democratic Party's overwhelming victory in the US midterm elections sparked widespread concerns that the new Congress would tighten regulatory scrutiny on AI data center developments, a prospect that led to a deep correction in global tech stocks last week, directly impacting SoftBank.

Notably, on the eve of the earnings announcement, SoftBank announced a partnership with Grab and Malaysia's national oil and gas company PETROS, to jointly invest at least $1.85 billion in initial capital to develop AI infrastructure in Malaysia, with a long-term goal of establishing at least 5 gigawatts of AI computing capacity, demonstrating its continued commitment to advancing its AI strategy in the Asian market. In terms of revenue, this quarter's income was 2.22 trillion yen, exceeding the market expectation of 2.02 trillion yen, supported by growth in telecom and AI computing businesses.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到[email protected]，本平台相关工作人员将会进行核查。