SoftBank Group Corp. has secured a $10 billion margin loan backed by its stake in US tech giant OpenAI, marking another significant fundraising milestone in its AI investment strategy. According to the company's latest financial report, SoftBank entered into an agreement with Goldman Sachs Bank USA, JPMorgan Chase Bank NA, Mizuho Securities USA LLC, Apollo Global Funding LLC and Sumitomo Mitsui Banking Corp. for the two-year loan on Wednesday. The financial institutions serve as the mandated lead arrangers for the loan, which the borrower plans to draw down this month. As per Reuters, negotiations over the financing were delayed because lenders faced challenges in valuing OpenAI, which remains privately held.
SoftBank Group reported an 18% year-on-year decline in first-quarter net profit to 347.3 billion yen ($31.7 billion) for the April-June quarter, according to The Economic Times. Despite the profit decline from the previous year, the Japanese investment and technology conglomerate's earnings came in better than market expectations, supported by robust gains from listed investments. The company posted net income of 347.3 billion yen for the quarter, with the result cushioned by strong investment gains despite the absence of any valuation increase from its stake in ChatGPT developer OpenAI. As per LSEG, analysts had expected net income of only 120.23 billion yen, making the actual result roughly triple their forecasts.
SoftBank recorded an investment gain of 1.86 trillion yen during the quarter, with its shareholding in Intel emerging as the largest contributor, as reported by The Economic Times. Intel's share price has rallied in recent months as the semiconductor company continues its restructuring efforts under Chief Executive Lip-Bu Tan, who is a Son ally. The group also booked gains from its investment in ByteDance, the parent company of TikTok, further supporting quarterly earnings. Intel's share price climbed dramatically from $44.13 to $139.63 over the quarter, with SoftBank booking a 1.33 trillion yen gain on its Intel stake. The investment gains helped offset weaker contributions from the company's AI portfolio, particularly OpenAI which showed no fresh valuation gains during the quarter.
Despite no fresh valuation gains from OpenAI during the quarter, the artificial intelligence company remains at the center of SoftBank's long-term investment strategy, with the company's total investment in OpenAI slated to reach close to $65 billion by October. According to the latest disclosure, SoftBank's cumulative investment in OpenAI is expected to reach $64.6 billion by October, giving it an ownership stake of roughly 13%. The company said its total investment gain from OpenAI currently stands at $45 billion. OpenAI is preparing for an initial public offering that could take place next year, making its future valuation a key factor for SoftBank's financial performance. The margin loan follows a record $40 billion bridge loan that SoftBank secured for its investments in OpenAI, which attracted a new group of 21 lenders in a broader syndication phase last month.
With corporate exposure to the artificial intelligence boom in focus globally, investors are closely tracking SoftBank's AI investments and OpenAI exposure as the company bets big on AI development. Chief Financial Officer Yoshimitsu Goto addressed market concerns about AI data center bubble fears, stating at a Tokyo press conference that there's "clear demand and an overwhelming shortage of supply" and the company is "in a very healthy state." The Vision Fund segment income fell 98.8% year-on-year to 5.4 billion yen, marking a sharp decline from the previous quarter when OpenAI drove a Vision Fund gain of nearly $20 billion. Meanwhile, SoftBank's AI Computing segment, which houses Arm, deepened its loss to 200.8 billion yen due to higher expenses at Arm, Graphcore, and Ampere. The company secured the $10 billion margin loan from financial institutions in August using its OpenAI stake as collateral, while maintaining the $40 billion bridge loan to finance investment commitments through 2026.
Despite beating analyst expectations, SoftBank shares fell 4.4% to close at 5,695 yen in Tokyo, down 263 yen from the prior session, as reported by LSEG. The stock decline suggests investor concerns about the company's AI portfolio performance and the stagnant valuation of its major AI investments. SoftBank's net asset value reached a record high in June before easing in recent weeks, with the company's net asset value standing at 58.3 trillion yen as of August 5. The margin loan requires the borrower to post cash or repay early under certain conditions, such as a sharp drop in the value of OpenAI's preferred shares, reflecting growing investor caution about rising debt and uncertain returns on AI investments. Founder and CEO Masayoshi Son has continued reshaping SoftBank's portfolio to fund its aggressive AI expansion, including selling stakes in companies such as Nvidia and T-Mobile.
