He Spent $140 Billion on AI With Little to Show. Now He Is Trying Again. Billionaire Masayoshi Son said he would make SoftBank ‘the investment company for the AI revolution,’ but he missed out on the most recent frenzy PHOTO-ILLUSTRATION BY ALEXANDRA CITRIN-SAFADI/THE WALL STREET JOURNAL; PHOTO: ZUMA PRESS By Eliot Brown Updated July 3, 2023 12:02 am ET After global tech investor Masayoshi Son launched the world’s biggest private investment fund six years ago, he said his SoftBank 9984 0.74%increase; green up pointing triangle Group was plowing money into companies based on a single strategy. “We are not just recklessly making investments,” Son told investors in 2018. “We are focusing on one theme, which is AI.” More than $140 billion spent on 400-plus startups later, an artificial intelligence mania is sweeping the market—and SoftBank is playing catch-up. Despite the unprecedented spending spree that Son in 2020 said would make SoftBank “the investment company for the AI revolution,” one of the world’s most prolific tech investors has missed out on the frenzy in generative AI, the red-hot subsector in which products such as ChatGPT learn from huge datasets to create unique text or images. The Tokyo-based conglomerate has invested in just one of the 26 generative AI startups valued at more than $1 billion, according to PitchBook. The area has ignited in recent months, with private companies such as ChatGPT-maker OpenAI raising new rounds of investment cash that double or triple the companies’ prior valuations. SoftBank competitors includingCoatue, Lightspeed and Tiger Global Management have each backed several billion-dollar companies in the area. SoftBank CEO Masayoshi Son, presenting a robot during a news conference in 2014. PHOTO: ISSEI KATO/REUTERS At the company’s annual meeting in June, Son pledged again to be at the forefront of the field. He said AI will reshape humanity, and that he was devoted to becoming an architect of that future, admitting that he cried during moments of introspection last year. He was “ashamed that I made many mistakes,” he said. Son’s lack of success with AI shows the difficulties that face investors attempting to ride the current wave of enthusiasm. Even with a gargantuan amount of money to spread across dozens of companies and areas of the industry, picking winners is an elusive game. The AI wave that has jolted up numerous tech stocks has also had little effect on SoftBank’s portfolio of publicly traded tech stocks it backed as startups—36 companies including DoorDash and South Korean e-commerce company Coupang. Much of that stock fervor has been confined to the incumbent giants such as Microsoft and Meta Platforms, rather than the upstarts that SoftBank targets. SoftBank missed out on huge gains at AI-focused chip maker Nvidia: The Tokyo-based investor put around $4 billion into the company in 2017, only to sell its shares in 2019. Nvidia stock is up about 10 times since. EU lawmakers voted for AI regulation. Photo: Julien Warnand/Shutterstock SoftBank has benefited from the AI boom in one of its companies: chip designer Arm, which it bought in 2016 for $32 billion. Analysts say Arm is likely to be valued at more than $60 billion—a big boost from prior estimates—in an initial public offering expected in coming months. That, along with a weaker Japanese yen, has helped lift SoftBank shares more than 33% since late May. Amir Anvarzadeh, a strategist at research firm Asymmetric Advisors, said that SoftBank’s missing the AI companies reinforces his belief that the bank “is not a great investor.” Still, he said, with a boost to Arm’s valuation, “potentially that really rescues SoftBank from its past disastrous investments.” In recent months, the AI fever has only grown hotter in the venture sector. Prices have skyrocketed for AI startups considered hot, and investors are throwing money at founders who seem promising. A French AI startup raised $113 million last month, less than eight weeks after it incorporated. SoftBank says that nearly 90% of the companies backed by Vision Fund use AI in their daily operations, largely for tasks such as predictive analytics and systems that make recommendations based on past behavior and other factors. At a June meeting, Son said he expects several of those companies to become big winners as the AI wave expands. Still, the miss by its Vision Fund of the AI investment trend is noteworthy given how much SoftBank emphasized the sector. Masayoshi Son said he expects winners among the companies Vision Fund backs. PHOTO: KIYOSHI OTA/BLOOMBERG NEWS Son mentioned “AI” more than 500 times in quarterly and annual results presentations between 2017 and mid-2022. In quirky investor presentations that featured diagrams with dinosaurs and steam engines, the SoftBank CEO said AI would “redefine all industries” and usher in a powerful new wave of the information revolution that began with computers—language similar to that many CEOs have begun using in recent months. He said SoftBank would look for the top startups in a field, what he called the Cluster of No. 1 AI Strategy. Part of the problem was timing: For most of the six years since Son raised the first $100 billion Vision Fund, pickings were slim for generative AI companies, which tended to be smaller or earlier in development than the type of startup SoftBank typically backs. In early 2022, SoftBank nearly completely halted investing in startups when the tech sector was in the midst of a chill and SoftBank was hit with record losses. It was then that a set of buzzy generative AI companies raised funds and the sector began to gain steam among investors. Later in the year, OpenAI released ChatGPT, causing the simmering interest in the area to boil over. SoftBank’s competitors have spent recent months showering AI startups with funding, leading to a wide surge in valuations to the point where many venture investors warn of a growing bubble for anyone entering the space. During the years that SoftBank was investing, it generally avoided companies focused specifically on developing AI technology. Instead, it poured money into companies that Son said were leveraging AI and would benefit from its growth. For example, it put billions of dollars into numerous self-driving car tech companies, which tend to use AI to help learn how humans drive and react to objects on the road. Other SoftBank investments enjoyed less-clear benefits from the technology, showing the perils of pushing money at a sector with such a murky theme as AI, which includes everything from mundane tasks such as making social network recommendations to generating complex engineering code. SHARE YOUR THOUGHTS Can SoftBank still benefit from the artificial-intelligence mania sweeping the market? Join the conversation below. Son told investors that AI would power huge expansions at numerous companies where, years later, the benefits are unclear or nonexistent. In 2018, he highlighted AI at real-estate agency Compass, now-bankrupt construction company Katerra, and office-rental company WeWork, which he said would use AI to analyze how people communicate and then sell them products. Analysts expect the SoftBank wallet to open once again. Son, at his investor meeting, said the company’s defensive strategy of the past year was nearing its end. “The time is approaching for us to go on the counteroffensive,” he said. “It’s very hard to see how he translates the walk into the talk,” said Victor Galliano, an independent analyst who publishes research on the SmartKarma platform. “Arm may be very well positioned to indirectly benefit,” he said of SoftBank’s chip maker. But there aren’t other clear winners in the SoftBank portfolio.
Well I have not read any billionaires are stupid. Son is ahead of his time in many instance. Yahoo free email vs AOL subscription, remember that. There is Alibaba. And in his pocket, ARM. I can't imagine Arm deal can be had nowdays. Arm can go public themselves.
Your arm chair quarterbacking is non-stop. his thesis was pretty interesting. he wanted to use his size to be the largest shareholder in the winner take all world we live in. If it worked he would be a trillionaire. Unfortunately for him it didn’t. in the meanwhile you spend your entire day on elitetrader obsessing over the people attempted to do big things and didn’t succeed. Share something insightful or something you are doing.
You are an idiot. I criticized Son, because he thought that a real estate company suddenly became a tech company. As a result with his "unlimited" money he pushed up renting prices in several cities. As it turned out a real estate company is not a tech company and the idea of WeWork hasn't been profitable in the large scale. If you can't take facts, take my Ignore...
WeWork had nothing to do with the OP. You brought it in to the equation. So if you can do that, i can talk about all his other investments too.