SoftBank looks to balance caution with opportunity amid volatile market as profit shrinks

SoftBank aims to balance caution with optimism as it navigates through current market volatility after investing most in four quarters from its Vision Fund investment unit.

The Japanese investment conglomerate, which invested over $600 million in April-June 2024—the most since the comparable quarter last year, will approach company valuations with caution amid the current market volatility, said CFO Yoshimitsu Goto in a post-earnings call on August 7. However, he noted that the volatility also presents a good opportunity for investment as the company aims to double down on its artificial intelligence bets.

"The market is so volatile and of course, we are cautious about how the market reactions could lead to evaluation when it comes to a new investment. I think in a sense, maybe we should be protective and conservative. But in general, I think it's a good opportunity for investment," Goto said in the post-earnings call.

"We need to figure out the best balance (when it comes to investing in high-growth assets). We want to make an investment and also we want to focus on return to shareholders," Goto explained highlighting a delicate balance between seizing new opportunities and rewarding investor loyalty through measures like the recently announced ¥500 billion ($3.4 billion) share buyback.

Goto's comments come at a time when SoftBank's stock saw massive volatility, with the company's share price dropping the most on August 5 since listing in 1988, and then jumping almost 18% over the next two days. The share price, however, is still about 13% down this month.

Also Read

SoftBank back in the black with modest $70M profit in April-June quarter

SoftBank, which has reported significantly smaller profits for the third consecutive quarter, is preparing for a tumultuous period ahead. Shares of global technology companies the Japanese investor invests in are plunging due to global macroeconomic concerns.

Yet, Goto, who has been handling earnings calls since November 2022, tried to allay fears about the current market volatility and the potential for a near-term downturn. In his usual demeanour, Goto drew historical parallels with the dotcom bust and the infamous Black Monday of 1987, when stock markets unexpectedly crashed worldwide

"I am a survivor of the Black Monday. I have a bit of a different angle (on the current downturn) because I have been in the market for 40 years and I know how dramatically it has changed with changes in technology and financial engineering," Goto said.

"So if you see the decline in numbers, you may feel very surprised by the headlines, but we need to analyse the market environment in general. ...when the dotcom bubble burst, the leading companies back then were Amazon, Microsoft, and Google... Now, those companies are the top 10 in terms of market cap," Goto added.

Goto drew a historical parallel to highlight the potential for transformative growth, observing that today's high expectations for AI mirror the past enthusiasm for the internet. Although AI has captivated investors this year, there are concerns about the time it takes for these companies to become profitable, and thus there have been concerns over valuations.

"In the past six months there has been good movement in the shares of AI and semiconductor companies and so I believe there is room for decline as well as now may be the time for the market to revisit valuations," Goto said when asked about his view on the valuations of some AI and semiconductor companies in the recent past.

"We are believers of AI and we believe it will change people's lifestyles. The timelines for this (for lifestyles to change) may be different and maybe we need longer than expected, and in so we might witness volatility like the internet bubble of 2000. But we don't want to take any extreme steps when the situation is volatile," Goto explained on whether the investment giant would revisit its AI investment plans due to the current volatility.