SoftBank’s Nvidia sale rattles market, raises questions

Masayoshi Son is not known for half measures. The SoftBank founder’s career has been littered with eyebrow-raising bets, and each seems more outrageous than the last.

His latest move is to cash in his entire $5.8 billion Nvidia stake to go all-in on AI. And while it took the business world by surprise on Tuesday, maybe it shouldn’t. At this point, it’s almost more surprising when 68-year-old Son doesn’t move his chips to the center of the table.

Recall that during the dot-com bubble of the late 1990s, Son’s net worth rose to about $78 billion in February 2000, briefly making him the richest person in the world. Then came the ugly dot-com implosion months later. He personally lost $70 billion – which at the time was the largest financial loss by any individual in history – when SoftBank’s market capitalization fell 98% from $180 billion to just $2.5 billion.

Amid those horrors, Son made what would become his most legendary bet: a $20 million investment in Alibaba in 2000, or so the story goes, after just a six-minute meeting with Jack Ma. That commitment would eventually become valuable $150 billion by 2020, making him one of the most celebrated figures in the venture industry and funding his comeback.

That Alibaba success has often made it harder to tell when Son has been at the table too long. When Son needed capital to launch his first Vision Fund in 2017, he didn’t hesitate to apply for $45 billion from Saudi Arabia’s Public Investment Fund – long before taking Saudi money became acceptable in Silicon Valley.

After journalist Jamal Khashoggi was murdered in October 2018, Son condemned the killing as “heinous and deeply regrettable” but emphasized that SoftBank “could not turn its back on the Saudi people,” upholding the company’s commitment to managing the kingdom’s capital. In fact, the Vision Fund ramped up dealmaking soon after.

That didn’t turn out so well.

Generated a big bet on Uber paper loss for years. Then came WeWork. Ignoring his lieutenants’ objections, Son “fell in love” with founder Adam Neumann and awarded the co-working company a staggering $47 billion valuation in early 2019, after making several previous investments in the company. But WeWork’s IPO plans collapsed after the company made a celebrity announcement disturbing S-1 filing. The company never fully recovered — even after Neumann was pushed out and a series of belt-tightening measures were implemented — ultimately costing SoftBank $11.5 billion in stock losses and another $2.2 billion in debt. (Son later reportedly called it “a stain on my life.”)

Son has been busy with a new comeback for years and Tuesday will undoubtedly be remembered as an important moment in his turnaround story. It will likely be remembered as the day SoftBank sold all 32.1 million Nvidia shares — not to diversify its bets, but to double down elsewhere, including on a planned $30 billion commitment to OpenAI and to participate (it reportedly hopes) in a $1 trillion AI production center in Arizona.

If selling that position still gives Son heartburn, that’s understandable. At around $181.58 per share, SoftBank left just 14% below Nvidia’s all-time high of $212.19, which is a strong impression. That’s remarkably close to peak valuation for such a huge position. Still, this move marks SoftBank’s second full exit from NVIDIA, and the first was extremely costly. (In 2019, SoftBank sold a $4 billion stake in the company for $3.6 billion, shares that would now be worth more than $150 billion.)

The measure also threw the market into turmoil. At the time of writing, Nvidia shares are down almost 3% following the announcement, even as analysts emphasize that the sale “should not be seen as a cautious or negative stance toward Nvidia,” but rather reflects SoftBank’s need for capital for its AI ambitions.

Wall Street is wondering: Is Son seeing something right now that others aren’t? Judging from his track record, maybe – and that ambiguity is the only thing investors should go with.