Bet on Super AI, and if you don't succeed, you will be a beneficiary.
At the end of 2022, shortly after the Vision Fund lost another record, Masayoshi Son announced that SoftBank would turn from defense to attack to focus on AI, hoping that SoftBank could lead the AI revolution.
As it turned out, Son was not wrong in his judgment. In 2023, ChatGPT will detonate the global AI wave in one fell swoop.
Someone asked him if he was an investor or an entrepreneur, and he said, "I'm both."
Despite being known as the "Debt King", Son believes that borrowing is for growth. Importantly, SoftBank needs to maximize shareholder value after deducting liabilities.
According to the latest financial report released by SoftBank Group, the company's turnover in 2023 will reach 6.84 trillion yen (about 280 billion yuan), operating profit will be 876.1 billion yen (about 40 billion yuan), and the company's value will increase by 20 trillion yen.
Masayoshi Son's explanation because of ARM.
SoftBank had acquired ARM for 3.3 trillion yen. In order to complete the acquisition, he even did not hesitate to borrow from Mizuho Bank and pay a 40% premium to realize the full acquisition. Despite the opposition within the company.
Since two years ago, Son has been in close communication with ARM's CEO Rene every day, through WhatsApp, phone and Zoom, 5~10 times a day, focusing on following up on all things ARM. Today, the bet has been won, and the asset value of 3 trillion yen has become 24 trillion yen.
In the past, everyone asked SoftBank what Masayoshi Son had done and created.
"I feel old. Life is limited, and I am achieving nothing. Two years ago, Son began to feel anxious and self-doubting, "I cried for two weeks. Finally, SoftBank's mission has been found - to promote the evolution of mankind. What is this goal? It is to realize artificial superintelligence (ASI). He said it was a goal that was decided on June 11 last year, but it was not publicly announced. It sounds like a big goal, but it's true.
Son has said that when he makes his next big tech bet, he's ready to take the plunge, which also means that SoftBank will make a big investment in artificial intelligence (AI), which could be a big success or a complete failure, but SoftBank has no choice but to try. For SoftBank, not taking risks is the biggest risk.
The Vision Fund, an important tool for SoftBank, has also been experiencing record financial losses since two years ago, after Son and SoftBank switched to "defensive" mode, with investment slowing down, and now, SoftBank can be said to be in the stage of "having to take more risks", especially with the rapid development of AI. Despite WeWork's setbacks, he firmly believes that through the Vision Fund's investment, SoftBank will occupy an important position in the future of AI.
2 AI companies a week, accelerate the pace of investment
According to people familiar with the matter, Vision Fund 2 will invest $10 million to $20 million in Perplexity AI, a U.S. search startup. The round could triple Perplexity's valuation to $3 billion, making it one of the most valuable companies in the industry. However, the final details of the investment are said to have not been finalized, and the terms are still subject to change.
Perplexity has been around for less than two years, but it is trying to use artificial intelligence to compete with Google, Alphabet's ace search engine. The company raised $73.6 million in January from Nvidia and Amazon founder Bezos, valuing it at $520 million.
Now, SoftBank's investment not only solidifies its business partnership with Perplexity, which the two companies announced will work together to provide a free one-year subscription service to SoftBank's wireless customers in Japan, but also underscores SoftBank's investment ambitions in the field of artificial intelligence.
This is the latest in a series of AI investments recently announced by SoftBank. After a few years of silence, it is clear that SoftBank is accelerating the pace of its investment activity, as the news comes that it is forming a joint venture with Tempus AI to use artificial intelligence (AI) to analyze personal medical data to make treatment recommendations.
Son said it is hoped that SoftBank and Tempus AI will bring AI's treatment recommendations and clinical trial recommendations to the Japanese market, making Japan another healthcare market outside the U.S. that can offer such services.
Tempus AI is a U.S.-based precision medical technology company dedicated to providing advanced data and analytics tools to the global healthcare sector, with its core business being genomic testing services. In the previous two months, SoftBank had invested about $200 million in Tempus' Series G funding round. Tempus was listed on the NASDAQ on June 14 with an initial public offering price of $37, while its share price had fallen to around $27.50 as of the close of trading on Wednesday (June 26). The partnership, in which SoftBank and Tempus will each invest 15 billion yen (US$93 million) in the joint venture, is expected to close in July.
At the just-concluded 44th shareholder meeting of SoftBank, Masayoshi Son delivered an impassioned and visionary speech highlighting his vision for the future of AI and the strategic direction of SoftBank's development. "SoftBank's mission is to assist human progress by achieving Super Artificial Intelligence (ASI), which is 10,000 times more capable than humans."
Son has been outspoken about his belief in artificial intelligence and the need to reinvent the company. He said that the SoftBank Group has done a lot so far, and these are all warm-up actions to realize ASI's great dream. Now, we are making every effort to combine robots with AI for various types of mass production, logistics, and autonomous driving.
Son's firm belief that AI will be a source of future growth has led him to reshape SoftBank and its Vision Funds to ensure they play a key role in the next phase of AI-led development. So over the past 12 months, since Son announced that SoftBank was preparing to "launch a counteroffensive," the company's investment and commitment spending have more than doubled from previous years to $8.9 billion. SoftBank said it was willing to maintain or even exceed this investment amount if it came across a suitable mega-deal opportunity.
Not long ago, SoftBank Group also announced plans to use AI semiconductors as a breakthrough to invest a total of 150 billion yen (about 1 billion U.S. dollars) by 2025 to enhance the computing power of AI data centers, including purchasing graphics processing units (GPUs) from Nvidia (NVDA-US), and some of the purchased chips will be used for its own AI research and development, and some will be leased to other companies in need.
In order to realize the "AI ambition"
$1.8 billion in overseas financing
In 2023, SoftBank lost 559.4 billion yen in investment, but the loss narrowed from the investment loss of 835.1 billion yen in fiscal 2022. The SoftBank Vision Fund (SVF) suffered an investment loss of 167.3 billion yen (excluding gains related to SVF's investment in SoftBank subsidiaries), including SVF's investment income in ARM and other subsidiaries, with SVF receiving an investment income of 724.3 billion yen in fiscal 2023.
Investing in AI requires huge cash flow. Now that SoftBank Group's cash has increased by 5,000 billion yen, coupled with the original reserves, Son has the confidence to make a big impact in the field of AI, and he even wants to create his own chip company specializing in AI chips.
Last week, SoftBank Group Corp. It also raised a total of approximately $1.86 billion through the issuance of US dollar and euro bonds, the first foreign currency-denominated bond issuance transaction since 2021. SoftBank said the funds will also be used to repay debts and fund the group's investment and business plans.
In 2017, Son established the Vision Fund at SoftBank Group, focusing on global technology investments. In a statement at the time, Son said: "Technology has the potential to solve the challenges and risks facing humanity today, and companies working to solve these problems need long-term and patient capital and visionary strategic investment partners to provide them with resources to help them grow." In line with this strategy, the SoftBank Vision Fund will invest in companies that can lay the foundation for the next phase of the information revolution. In May of this year, SoftBank's Vision Fund was established, raising $100 billion; In July 2019, the second phase was established, but the scale of the fundraising was less than $54 billion. Technology investment accounts for about half of SoftBank Group's investment landscape.
According to media statistics, in the craziest year of 2019, Son invested about $74.6 billion in more than 80 companies, covering almost all potential industries such as telecommunications, games, new energy, chips, and robots. Among them, the most famous WeWork and Uber both ended dismally. But luck doesn't seem to favor Son and SoftBank — in 2022, Vision Fund investment losses reached 5.3 trillion yen, or about $40 billion, further widening losses from $18 billion in fiscal 2019 and $16 billion in fiscal 2021. It is also because of this that even if all the shares of Ali were sold, which temporarily relieved SoftBank's urgent need, it failed to reverse the situation that SoftBank Investment lost money year after year. Son had to choose to move SoftBank into "defensive" mode – to be more conservative in terms of investment.
However, ARM's success has boosted Son's confidence in the semiconductor industry, and SoftBank has now achieved profitability for several consecutive quarters, which is due to the huge profits brought by investing in Arm. HE ALSO HOPES THAT AI CHIP COMPANIES CAN COMPLEMENT ARM HOLDINGS PLC AND REPLICATE ARM'S SUCCESS.
Taking a closer look at Son's AI strategy, he is trying to build an ecosystem in the AI field by making an all-round layout from the underlying chip, basic model to application scenarios. According to Smartbeast analysis data, SoftBank China has invested in about 360 cases in China, of which about 50 involve AI incidents, accounting for nearly 14%. At the beginning of last year, SoftBank China participated in the investment of Shengguang Silicon Research Institute, a research and development company of semiconductor materials and special equipment; At the end of the year, SoftBank China also included SoftBank China in the nearly 700 million Series B financing of Xindi Digital, a domestic 3D CAD and industrial cloud software provider. In addition, in the field of AI, since 2021, SoftBank China has also participated in the investment of Tashan Technology, a manufacturer of artificial intelligence touch sensor chips; mobile phone RF chip and navigation chip manufacturer Carmei Xinxin; Semiconductor R&D companies Chaoxinxing, Qinghe Wafer, and power semiconductor module packaging design and manufacturer Lips Semiconductor. In addition, SoftBank China has also acquired three listed companies, GDS, VeriSilicon Microelectronics, and SMIC, as well as unicorn companies such as CloudMinds Technology, a cloud-based intelligent robot operator, TalkingDate, a third-party data intelligence service provider, and UnionTech Software, an operating system manufacturer.
SoftBank is also working on the development of high-performance generative AI designed specifically for the Japanese language, with the company expected to complete the development of a large language model (LLM) with 390 billion parameters in fiscal year 2024 and start developing a high-performance model with 1 trillion parameters next year. In addition, SoftBank plans to invest $9 billion to accelerate the transformation of AI, and Son is optimistic about AI.
Some analysts believe that SoftBank's investment in the field of AI may trigger a new round of industrial competition and technological innovation, and promote the development and application of AI chip technology, which is a good thing for the entire semiconductor industry. However, there are also views that the AI market is fiercely competitive, with high technical barriers, long R&D cycles, and huge investment, and SoftBank's investment is also facing greater risks and uncertainties. In order to replicate ARM's success, SoftBank also needs to be fully prepared and deployed in terms of technology, market, and talent.
Ambitious Masayoshi Son
In 2016, he fell in love with Nvidia, founded by Chinese-American Jensen Huang, at that time, semiconductor chips had not yet become a topic, and Nvidia had not yet entered people's field of vision. He invited Huang to his home in California and spent four hours having dinner with him to discuss the acquisition. He told Huang: "I've bought ARM, and I'm going to buy Intel, buy you [Nvidia]." But unexpectedly, Huang refused: "I don't work for money, and I don't want to be your subordinate." ”
In today's artificial intelligence investment boom, Nvidia's stock price has been soaring, and its market value recently reached $3.33 trillion, surpassing Microsoft and Apple to become the world's most valuable company. "If Nvidia had been acquired at that time, SoftBank would be the world's largest company by market capitalization today. SoftBank liquidated its position in Nvidia in 2019, and if it holds on to date, the latest value of its stake will be $152.6 billion. It also means that we are missing out on nearly $150 billion in earnings. The fish that escaped was too big. ”
Son Masayoshi read "The Art of War" by heart, and reorganized the 25-character SoftBank motto in his own words: "The Tao of Heaven and Earth, Seven Fights, First-class Offensive and Defensive Groups, Wisdom, Faith, Benevolence, Courage and Strictness, Wind Forest, Volcanic Sea". A Korean-Japanese whose ancestors came from China, came from a family of immigrants who were discriminated against, became a billionaire from scratch, became the richest man in the world when he was in his glory, and set a record for the most losses when he was down. Now 67 years old, whether facing the past or the future, regret but also lose "ambition".
Founded in 1981 as a trading company engaged in telecommunications and Internet business, the SoftBank Group has become a mixed industry conglomerate with telecommunications companies, semiconductor companies, and investment businesses.
Ma Yun commented that Sun Zhengyi is a wise and foolish person, with almost no superfluous words, like a character in martial arts: quick decision-making, able to do things according to his own ideas, and do great things. Now, Son has the ambition to make a big splash in the AI space, but he seems to have forgotten the fact that his competitors – not only hardcore giants like Nvidia, Google, and Amazon, but also China's BAT and Byte – are preparing for an AI race. Competition in the field of AI is becoming more and more intense.
In investment theory, high risk is often accompanied by high returns. There are many cases of big bets on technology investment, with both successes and painful failures. Son's past investments are first-hand. Now, based on a deep belief in the value of AI, a strong prediction of future scientific and technological trends, even in the face of huge uncertainties, he is willing to invest heavily in this super artificial intelligence technology gamble, whether Son can realize his AI dream, the answer is unknown, but courage and courage are indeed worthy of admiration.