The CEO of SoftBank, Masayoshi Son, delivered a speech during the annual general meeting of the company in Tokyo on June 20, 2024, with the shares of SoftBank Group hitting an all-time high. The surge coincides with the notable recovery shown by the tech investment arm of the company and the reemergence of its vocal founder, Masayoshi Son, as he steers the Japanese behemoth towards a future dominated by artificial intelligence.

Investors and analysts attribute the recent surge in SoftBank’s share price to the success of British chip designer Arm, in which SoftBank holds a majority stake. The Japanese conglomerate’s shares closed at a historic high of 11,190.00 Japanese yen on Thursday, showcasing a remarkable turnaround from the challenges faced during the dotcom crash in the early 2000s and the recent struggles encountered in the tech market.

SoftBank’s Ascension to the Pinnacle

Established in 1981 by Son, SoftBank initially focused on software distribution. The company went public in Japan in 1994 and, amid the rise of the internet, initiated a $2 million investment in Yahoo during the mid-’90s, marking the commencement of its venture into tech investments.

The dotcom boom led by the advent of the internet and Yahoo propelled SoftBank’s stock to its peak closing price of 10,111.1 yen on Feb. 18, 2000. Nevertheless, as the internet bubble burst, SoftBank’s share price plummeted significantly, dipping over 90% from its dotcom-era high. It took nearly 21 years, until Feb. 16, 2021, for SoftBank to surpass its prior record-high close.

The Vision Fund

SoftBank’s recent climb to an all-time high in share price has been turbulent since Son introduced the company as a visionary trailblazer in 2017 with the launch of the ambitious technology investment arm, the Vision Fund. Despite facing setbacks, including significant losses within the Vision Fund in 2022, Son announced a shift from a defensive stance to an offensive strategy in light of the investment opportunities in artificial intelligence.

The rebound of SoftBank’s share price commencing from May 2023, coupled with improved financial performance from the Vision Fund amidst broader tech stock recoveries, has instilled optimism among investors.

The Impact of Arm Chips

The recent surge in SoftBank’s share price, approximately 78% year-to-date, is largely attributed to the successful IPO of Arm, a company acquired by SoftBank in 2016. Despite SoftBank retaining roughly 90% ownership post-IPO, Arm shares have soared by nearly 124% this year, underscoring the strategic foresight of SoftBank in investing in the semiconductor realm.

Analysts highlight that SoftBank’s strategic emphasis on building an AI ecosystem, exemplified through the acquisition of Arm in 2016, has positioned the conglomerate favorably within the semiconductor market and the burgeoning landscape of AI applications.

Investor Sentiment Towards SoftBank

Examining SoftBank’s valuation in relation to its investments and holdings has been a focus for investors over the years. Despite SoftBank Group’s valuation standing at approximately $101.5 billion, Arm’s market capitalization exceeds $176 billion, with SoftBank’s 90% stake valued at around $158 billion.

Investors and analysts believe that SoftBank’s stock price, primarily bolstered by Arm’s performance, fails to accurately reflect the conglomerate’s overall value. The concept of sum-of-the-parts (SOTP) valuation is being advocated to provide a holistic assessment of SoftBank’s holdings and businesses, indicating that the company’s stock price does not fully represent the value embedded within its diverse assets.

The Role of Artificial Super Intelligence

Son’s unwavering focus on artificial intelligence and its potential to enhance SoftBank’s value significantly has garnered attention. Son recently articulated his vision for the advent of artificial super intelligence (ASI), a concept foreseeing intelligence exponentially surpassing human capabilities.

As investors explore opportunities within the AI realm, with companies like Nvidia experiencing meteoric stock price surges, the trajectory of SoftBank’s stock remains intertwined with its early investments in AI. Analysts anticipate a reduction in the discount factor associated with SoftBank’s stock as the company’s AI investments mature and demonstrate value creation.