SoftBank stock soared over 19 percent on Thursday, May 21, after NVIDIA delivered another blockbuster quarterly report, reinforcing the strength of the artificial intelligence (AI) boom. The Japanese firm, which had suffered five straight sessions of losses, rebounded sharply as investors reassessed its heavy exposure to AI-related assets.
What drove the SoftBank stock surge
The increase in revenue for NVIDIA was spectacular, surging to $81.62 billion this past year by an amazing 85 percent, crushing all estimates/ forecasts and showing an enduring demand for AI infrastructure. The chip maker company also announced an $80 billion stock repurchase plan and increased its dividend.
In addition, SoftBank has a strong tie to this momentum through its investments in Arm Holdings (developer of chips within NVIDIA systems), and that they have invested over $30 billion in OpenAI, which has generated $45 billion in gains over the past fiscal year.
According to Andrew Jackson, Head of Japanese equity strategy for Ortus Advisors, the increase in optimism around the possibility of an Initial Public Offering (IPO) for OpenAI caused shares of Arm Holdings to rally approximately 15 percent. CreditSights increased its outlook for Softbank’s debt to “outperform” and stated Arm’s rise in valuation “adds a substantial amount of strength to Softbank’s overall balance sheet.”
SoftBank’s broader AI strategy
With a focus not only on its substantial investments into OpenAI and Arm, but also on transforming its overall portfolio, SoftBank continues to change course. For example, earlier this month, SoftBank divested its ownership of Twenty One Capital, an equity-based Bitcoin firm focused on treasury investments to introduce Tether into the marketplace. A conditional requirement of SoftBank’s exit was for selected executive officers to resign as directors of the Twenty One Capital board.
What this means for the AI tech space
This rally further indicates that the overall narrative surrounding the AI wave has not changed and continues to be one of the main themes driving the overall tech market. The continued demand and need for AI-related infrastructure and chips have enabled NVIDIA’s results to confirm this, while SoftBank has a leveraged exposure to AI to be the best barometer of AI sentiment. Moreover, the potential OpenAI IPO (which could be one of the largest in tech history) creates a major catalyst for further gains.