SoftBank Group is doubling down on artificial intelligence investments, driven by an impressive cash position and renewed financial stability.
The Tokyo-based investor’s Vision Fund 2 recently committed $500 million to OpenAI, marking one of its most strategic placements in the AI sphere this year. “The size was not huge from our perspective—$500 million—but as a deal, it was significant,” a SoftBank representative said during the company’s Q2 earnings call.
SoftBank’s Vision Fund has long been recognised as a bold player in technology investment, particularly during the first boom of tech investments. Now, with a stabilised cash position of over 4 trillion yen, or approximately $26 billion, SoftBank is primed for further strategic bets on generative AI, banking on what it sees as sustainable growth opportunities. The timing couldn’t be better, CFO Yoshimitsu Goto shared, pointing to the company’s “ample cash reserves, which will enable us to further AI investments” while maintaining financial stability.
This strategy has required SoftBank to be selective, adding AI companies “one by one” to the Vision Fund 2 portfolio, ensuring each investment aligns with the fund’s renewed focus on long-term, strategic growth. According to SoftBank’s earnings call, Vision Fund 2 is “very selective in adding investments in AI-driven companies that align with our vision.”
In terms of SoftBank’s investment strategy into companies leveraging AI, it says that there are four key criteria. One, keeping an eye out for transformative companies that are driving innovation and value creation through artificial intelligence.
The second criterion is to look out for companies that have nailed down product-market fit as well as scalability. “Having a good product does not necessarily mean having a product market fit. The product should not only meet market needs, but also needs to have significant potential for growth, scale and impact,” said Navneet Govil, CFO at SoftBank Global Advisors.
Additionally, the company is also looking at unit economics as a key criterion, including financial health as well as a sustainable and scalable business model that promises long-term profitability and success. The fourth is consistent execution of excellence, ensuring efficient translation of a vision into a tangible business.
Investment in Open AI
SoftBank noted that OpenAI’s robust technology and rapid adoption rate reflect “strong momentum toward the realisation of AGI that benefits all of humanity.”
OpenAI’s ChatGPT platform exemplifies this momentum, with 250 million weekly active users, 11 million ChatGPT Plus subscribers, and 1.7 billion average monthly website visits. As SoftBank explained, “If you compare [OpenAI] with competitors, it’s clear… OpenAI’s ability and capability is far ahead.” Despite AI advancements by hyperscalers such as Meta and Google, SoftBank believes OpenAI holds a dominant position that will only strengthen as global demand for AI services grows, as per the CFO.
SoftBank’s focus on OpenAI is part of a larger portfolio strategy to position Vision Fund 2 in other AI-driven platforms. In addition to OpenAI, SoftBank invested in Glean, an enterprise AI search company, which leverages AI agents to enhance functionality for its clients. Poolside, a developer-centric company specialising in generative AI tools for software development, also joined the Vision Fund 2 portfolio, as did Opera, a browser company that recently integrated AI capabilities.
Vision Fund 2’s expanding portfolio and IPO pipeline
SoftBank’s Q2 earnings report showed that Vision Fund 2’s portfolio has begun yielding positive returns, particularly in the form of IPOs from portfolio companies. In Q2 alone, Vision Fund 2 saw IPOs from two companies—Ola Electric, a major player in electric scooters, and FirstCry, an ecommerce platform for baby and kids’ products. These successful exits mark a return to form for Vision Fund 2, which has weathered market volatility and valuation adjustments over the past two years.
In the quarter, FirstCry contributed $642 million to the SoftBank Vision Fund’s gains, with Ola Electric and Delhivery adding $401 million and $306 million, respectively, according to SoftBank’s quarterly results presentation.
The listing of Ola Electric in August 2024 positively impacted SVF2, boosting its public portfolio valuation by 0.2% for the quarter.
Swiggy, another SoftBank portfolio company, is planning to raise close to Rs 11,700 crore in its IPO at a valuation of Rs 87,000 ($11.3 billion) at the upper price band, set between Rs 371 and Rs 390 apiece, when it lists on the Indian stock exchanges on November 13. At 3.59X subscription, Swiggy’s stock has seen lower demand compared to the recent startup IPOs, including its rival Zomato, which was subscribed nearly 38 times.
