SoftBank’s $2B investment in Intel delivers $8.2B windfall as OpenAI takes a backseat

SoftBank’s massive bet on artificial intelligence paid off this quarter, but the biggest winner wasn’t OpenAI. It was Intel.

The Japanese investment giant reported a 1.3 trillion yen, or roughly $8.2 billion, gain on its Intel holdings during its fiscal first quarter, helping SoftBank post net profit of 347.3 billion yen, or about $2.2 billion. That crushed the 120.23 billion yen analysts surveyed by LSEG had expected.

“SoftBank saw a 1.3 trillion yen gain on the shares it owns of U.S. chipmaker Intel. SoftBank had announced a roughly $2 billion investment in Intel last year,” CNBC reported.

The result came with a twist. OpenAI, which has become one of SoftBank’s largest and most closely watched investments, contributed no investment gain or loss during the quarter. Instead, Intel and TikTok owner ByteDance did much of the heavy lifting.

SoftBank invested roughly $2 billion in Intel last year, a bet that has benefited from a stunning rally in the U.S. chipmaker’s shares. Intel stock has climbed nearly 400% over the past 12 months. The surge helped SoftBank’s investment division, separate from its Vision Fund operation, report segment profit of 1.05 trillion yen.

The quarter underscores just how quickly SoftBank’s investment fortunes can shift. Net profit still fell nearly 18% from a year earlier, yet the Intel gain pushed earnings far beyond market expectations.

ByteDance provided another boost. SoftBank’s Vision Funds recorded a $1.7 billion increase in investment value during the quarter, driven largely by a $2.2 billion increase in the value of its ByteDance stake. Losses elsewhere in the portfolio, including PayPay, offset part of that gain.

“The Vision Funds, which house investments spanning OpenAI to TikTok-owner ByteDance, saw a gain of $1.7 billion in value in the first quarter. That was primarily driven by a $2.2 billion increase in the value of SoftBank’s stake in Chinese firm ByteDance, which offset declines in companies like PayPay.”

The Vision Funds segment finished the quarter with profit of 5.4 billion yen, down sharply from 451.4 billion yen a year earlier.

OpenAI sits this quarter out

The absence of an OpenAI valuation gain stands out given the scale of SoftBank’s commitment to the ChatGPT maker.

SoftBank said in February that it had committed more than $60 billion to OpenAI, which would give the Japanese group roughly 13% ownership. Of that amount, $55 billion has already been invested.

Yet SoftBank recorded no gain or loss from OpenAI during the latest quarter. A person familiar with the matter told CNBC that SoftBank had seen no new information that justified changing its valuation of the private company.

That marks a dramatic change from the previous quarter, when SoftBank’s Vision Funds recorded a gain of nearly $20 billion, almost entirely tied to OpenAI.

The shift comes at a sensitive moment for AI investors. OpenAI faces competition from Anthropic, Amazon and a growing field of Chinese open-source AI developers. Corporate customers are also paying closer attention to what they are spending on AI and what they are getting back.

OpenAI confidentially filed for an initial public offering in June. A public listing could eventually give SoftBank a path to monetize part of its enormous position. A person familiar with SoftBank’s thinking told CNBC that the company would likely sell some OpenAI shares following an IPO, but not a “significant portion.”

SoftBank’s broader AI strategy remains expensive.

Its AI computing segment, which includes Arm, Graphcore and Ampere, posted a 200.8 billion yen loss for the quarter, compared with a 32.4 billion yen loss a year earlier. SoftBank attributed the deterioration partly to higher research and development spending across those businesses.

Investors have started questioning the price of SoftBank’s AI ambitions. Its shares have fallen roughly 34% from their June record as concerns grow over how the company will finance its investments and the concentration of its portfolio in Arm and OpenAI.

CEO Masayoshi Son has shown little sign of retreating. In June, he told CNBC that he does not believe SoftBank is overexposed to OpenAI, which accounts for around 20% of the company’s net asset value.

Son went further, predicting that the AI revolution would be 50 times larger than the dot-com boom.

“This is the biggest revolution of technology and realization that mankind ever experienced, so this is just like the beginning of the internet,” Son said.

For this quarter, though, SoftBank’s headline AI investment wasn’t the one generating the headline return. A $2 billion bet on one of America’s oldest chipmakers stole the show.