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On Tuesday, SoftBank, the Japanese multinational investment conglomerate, announced they had unloaded the entirety of its Nvidia stock and invested it into OpenAI. According to the company’s latest financial statements published on November 11, SoftBank sold $5.8 billion in Nvidia shares in October.
“OpenAI is one of our key growth drivers. The fair value of our OpenAI investment rose sharply, reflecting the latest transaction valuation,” said SoftBank’s CFO Yoshimitsu Goto in a video to investors. SoftBank invested $10 billion in OpenAI earlier this year, as a part of a $40 billion commitment. Out of that, $7.5 billion was invested through SoftBank’s Vision Fund 2 and $2.5 billion through co-investors.
Goto said that after OpenAI addressed its “long term structure,” by the end of 2025 SoftBank will invest an additional $22.5 billion in the company. Goto is referring to OpenAI’s long-awaited restructuring, which was approved at the end of October. The restructuring splits OpenAI into two separate organizations, the OpenAI Foundation, which is the nonprofit entity, and OpenAI Group, the company’s for-profit entity which has been restructured as a public benefit corporation. OpenAI’s previous for-profit corporate structure capped investors’ potential returns at 100 times their investment, with any additional revenue owned by the nonprofit. This is no longer the case, though the nonprofit currently owns a controlling share in OpenAI Group.
OpenAI’s nonprofit and for-profit entities have long had tensions. The company was initially founded as a nonprofit with the mission of producing artificial intelligence that will benefit all of humanity. But in order to attract outside investors, it spun out a for-profit arm in 2019. That tension came to a head in 2023 when the nonprofit board ousted Sam Altman with the explanation that he was no longer accountable to the board. But after investor pressure, Altman was reinstated and the process of restructuring OpenAI as a for-profit entity ensued. The new restructuring gave the OpenAI Foundation a 26 percent equity stake in OpenAI.
Goto cited OpenAI’s skyrocketing growth when compared to its competitors as a reason for SoftBank’s bullishness. Thus far, OpenAI has seen more than 870 million users download its app. That’s compared to 282 million users for Google’s Gemini, its closest competitor, and 50 times more downloads than Claude, which also ranked behind Elon Musk’s Grok.
The recent selloff has raised concerns about an impending AI bubble popping. Financial analysts have suggested that, according to Nvidia’s Price to Earnings ratio, a metric investors use to determine how much they are paying for $1 worth of a company’s profits, Nvidia’s shares are overpriced. The P/E ratio for Nvidia shares are currently hovering around 50 versus the industry average of 41, indicating that Nvidia shares may be overpriced.
SoftBank also made about $2 billion from its Deutsche Telkom shares and around $9 billion by selling its T-Mobile shares.
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Tekendra Parmar
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