SoftBank aims for $9bn a year in AI investment as it hunts big deals

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SoftBank is poised to commit around $9bn a year to investing in artificial intelligence, even as the Japanese tech group holds back the firepower for bigger deals aimed at accelerating the pace that It may be the most radical change in history.

Founder Masayoshi Son has been vocal about his belief in AI and the need to reshape the company as it seeks deals that can support the group's crown jewel, the UK-based chip designer arm, which went public last year. The price has since gone up.

SoftBank's spending on investments and commitments has more than doubled to $8.9bn in the 12 months since Son said the company was ready to go on a “retaliation”. SoftBank said it was willing to match, or even exceed, the money for the right megadeal.

“We will, in principle, maintain the same trend in terms of the pace of investment activity,” SoftBank Chief Financial Officer Yoshimitsu Goto told the Financial Times. “From now on, we want to increase investment in AI companies.

“The reason we keep our balance sheet at a very safe level is because we want to be prepared,” he added, “and we want to be flexible if there's something we want to move on.”

Son built SoftBank from an Internet broadband business into a regulated mobile phone network company, breaking up Vodafone Japan and Sprint along the way. He then transformed the group into an investment giant backed by Saudi Arabia and Abu Dhabi, while also capitalizing on a wildly successful investment in Alibaba.

In his belief that AI will be the source of future growth, the billionaire is trying to reshape SoftBank and its venture-backed Vision Fund, so that they remain relevant in humanity's next phase.

However, it faces strong global opposition. Big tech groups such as Microsoft, Amazon and Google have committed billions of dollars to partner with startups building AI models, while top venture capital firms are seeking deals with groups building AI products and applications. are

Softbank has also suffered losses on some of its biggest investments in recent years, including nearly $14bn in WeWork before the desk-rental startup went bankrupt.

The group's balance sheet has strengthened since those dark moments and on Wednesday, ratings agency S&P upgraded SoftBank back to double B plus, its highest non-investment grade, “asset quality Referring to “Improvement”.

That increased power gives SoftBank the ability to make larger deals, but Goto said he won't allow the acquisition to stretch its finances.

Highlighting a debt-to-value ratio of about 8.5 percent and a net asset value of ¥27.8tn ($180bn) — driven by Arm — SoftBank's CFO said it has the balance sheet to do tens of billions of dollars in big deals. There is a sheet capacity. . But he cautioned that investors should not expect SoftBank to finance such initiatives alone or without the use of structured or unrecourse financing.

“They [strength] That doesn't mean we're ready to spend $10bn, $20bn, $30bn. . . It's not something we expect to come off our balance sheet,” he said.

Deal-making seems to be on the rise. SoftBank this month invested more than $1bn in UK self-driving car startup Wayve, Europe's largest AI deal to date.

Kentaro Matsui, head of new business at SoftBank and a managing partner at its Vision Funds, said Beta was personally involved in the deal because of its size and realism.

Goto also outlined some of the areas he sees as essential investments to help the AI ​​sector grow and benefit ARM, including power generation and data centers.

But he declined to comment on press reports that Arm and SoftBank are considering developing an AI chip. The group is also in talks to buy another UK chip designer, Graphcore, according to a person familiar with the discussions. Softbank declined to comment.

After pulling back from an earnings presentation more than a year ago, Beta is scheduled to speak at SoftBank's annual shareholders meeting in June, when Goto suggested he may reveal more details about his AI plans. .

For some investors, those plans could distract the group from its core businesses, including Arm and its telecoms subsidiary SoftBank Corporation.

If you look at their investments, the volatility is such that whether they do $10bn or $20bn doesn't matter. . . And if they use AI chips, it will be all or nothing,” said one long-term investor in Tokyo. “Yes, they have the arm and can write big checks, but with planning. Moving towards implementation will not be easy.”

Inside SoftBank, however, the direction of travel appears set. His vision funds are already a very different animal from the years when he wrote big checks to startups. They've quickly moved from finding investments to delivering returns to exits, and that's led to billions of dollars in sales over the past year.

As its investment momentum slows, Vision Funds is increasingly integrating itself into SoftBank rather than acting as its own fiefdom. This is not least because the majority of the remaining investment money — held in another vision fund — belongs to the son.

This shift has resulted in increased roles for executives at Vision Funds. Last year SoftBank created its so-called Platform Group, which consists of Vision Funds advisors looking for AI investment opportunities.

Importantly, these investments are not necessarily made through Vision Funds, but are instead financed through the group's balance sheet – a decision that is defined by whether SoftBank assets sees as strategic, rather than something that will eventually be sold for profit.

“We've actually integrated our international businesses internally under the name 'One SoftBank' and the way the name reminds us of that,” said Alex Clewell, co-chief executive of SoftBank's Vision Funds. given as, the purpose of which is to bring money home.”

This article has been updated to clarify the size of SoftBank's investment in WeWork.

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