Nvidia’s sales from SoftBank raise questions in the market

Masayoshi Son is not known for half measures. The SoftBank founder’s career has been filled with impressive bets, each seemingly more outrageous than the last. His latest move is to cash out his entire $5.8 billion stake in NVIDIA to invest in artificial intelligence, and although it surprised the business world on Tuesday, it probably shouldn’t have. At this point, it’s even more surprising when the 68-year-old Son doesn’t push his chips into the middle of the table.

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

But amid this horror, Son made what became his legendary bet: a $20 million investment in Alibaba in 2000, which someone decided (the story goes) after just a six-minute meeting with Jack Ma. This share will eventually grow to be worth something 150 billion dollars By 2020, turning him into one of the most popular figures in the venture industry and funding his comeback.

Alibaba’s success has often made it difficult to know how long Son is staying at the table. When Son needed capital to launch his first Vision Fund in 2017, he didn’t hesitate to ask for $45 billion from Saudi Arabia’s Public Investment Fund — long before taking Saudi money became acceptable in Silicon Valley. After the killing of journalist Jamal Khashoggi in October 2018, Son condemned the killing as “horrific and extremely unfortunate,” but insisted that SoftBank could not “turn its back on the Saudi people” and maintain the company’s commitment to running the kingdom’s capital. In fact, the Vision Fund actually ramped up dealmaking soon after.

It didn’t go well. A big bet has been made on Uber Paper losses for years. Then came WeWork. Son overcame his aides’ objections, fell “in love” with founder Adam Neumann, and tasked the coworking company with a staggering $47 billion valuation in early 2019 after making several previous investments in the company. But WeWork’s IPO plans collapsed after it published a famous report worrying File S-1. The company never fully recovered—even after Neumann was fired and a series of austerity measures were instituted—ultimately leaving SoftBank with $11.5 billion in equity losses and another $2.2 billion in debt. (The son is said to have later called it “a disgrace on my life.”)

But Son has been making a comeback for years, and Tuesday will no doubt be remembered as a key moment in the story of his transformation. In fact, it will likely be remembered as the day SoftBank sold all 32.1 million of its NVIDIA shares — not to diversify its bets but instead to double down on its investments elsewhere, including a planned $30 billion commitment to OpenAI and participation (it hopes) in a $1 trillion AI manufacturing center in Arizona.

If selling this position still gives Son some heartburn, that’s understandable. At around $181.58 per share, SoftBank came out just 14% below NVIDIA’s all-time high of $212.19, which is a solid look. This is remarkably close to the peak valuation for such a massive position. However, the move marks SoftBank’s second full exit from NVIDIA, and the first was very expensive. (In 2019, SoftBank sold a $4 billion stake in the company for $3.6 billion, shares that may now be worth more than $150 billion.)

The move also shook the market. As of this writing, NVIDIA shares are down nearly 3% following the disclosure, even as analysts stress that the sale “should not be viewed as a cautious or negative stance toward Nvidia,” but rather reflects SoftBank’s need for capital to realize its AI ambitions.

Wall Street can’t help but wonder: Does Son now see something that others don’t? Judging by his track record, perhaps, that uncertainty is all investors have to go on with.