SoftBank Group’s Masayoshi Son is clearly committed to scaling up his presence in the booming artificial intelligence sector. The company is currently in the process of raising funds for its latest initiative. According to Bloomberg, the SoftBank founder aims to secure $100 billion to launch a new venture poised to rival Nvidia in the AI chip market.
This venture, referred to as Izanagi, plans to collaborate with Arm, the chip design firm that SoftBank spun off as a public company last year. As of this month, SoftBank retains approximately 90% ownership of Arm’s shares.
Following a strategy similar to the one employed for establishing its expansive Vision Fund, SoftBank is looking to attract institutional investors from the Middle East to raise about $70 billion of the target amount. The remaining $30 billion will be funded by SoftBank itself.
A spokesperson for SoftBank opted not to provide any insights.
Currently, Nvidia holds a strong grip on the AI chip industry, especially with its GPU chips. However, with the demand for AI processors expected to surge—coupled with ongoing challenges around efficiency and cost—there is ample opportunity for new players to enter the market. This could involve direct competitors to Nvidia's GPUs or innovative processing approaches entirely distinct from traditional models.
In a related development, OpenAI's Sam Altman is reportedly in discussions with investors in the United Arab Emirates to raise an astonishing $5 trillion to $7 trillion for a new AI chip project. OpenAI has emerged as a leading force in generative AI, powering both its own services, such as ChatGPT, and providing capabilities for other platforms through its GPT models. This positions OpenAI as one of the largest global consumers of AI chips, making such hardware one of its significant expenditures. Reports suggest that Altman has engaged with numerous potential investors and industry experts worldwide, including SoftBank’s Son, for this ambitious chip initiative. However, it appears that the Izanagi project is distinct from Altman’s AI chip vision.
Specifics regarding SoftBank’s new undertaking, including the companies responsible for developing the core technology and the project timelines, remain undisclosed.
Shifting Focus to AI
This new chip initiative aligns with SoftBank's renewed commitment to artificial intelligence. Historically, the company's most significant returns have come from its early investments in Chinese e-commerce giant Alibaba, which have generated over $70 billion. However, since March 2023, SoftBank chief financial officer Yoshimitsu Goto indicated that the company is strategically divesting portions of its Alibaba stake to reinvest those funds into the AI sector.
Goto characterized this AI pivot as both offensive and defensive, following a staggering $32 billion loss recorded by the Vision Fund—a high-stakes attempt to become a pivotal player in the startup ecosystem. Nevertheless, buoyed by its 90% ownership of Arm, SoftBank has experienced a robust recovery. In fact, recent quarterly returns for the Vision Fund have been the strongest since March 2021, while Arm’s stock has surged nearly 50% amid rising demand for AI chips. The announcement that Nvidia, a significant Arm customer, also holds a stake in the chip design company contributed to an increase in Arm’s stock price last week. “Arm will soon be indispensable to AI,” Goto proclaimed earlier this month.
Acquired by SoftBank in 2016 for $32 billion, Arm went public on Nasdaq in September 2023, achieving a valuation of $64 billion during its IPO. Arm serves an impressive roster of clients, including smartphone manufacturers and chip designers like Apple, Google, Microsoft, and Amazon, all of whom utilize its technology for developing and running large language models.
SoftBank reported its first quarterly profit for the period ending December 31, 2023, nearly three years after experiencing four consecutive losses, thanks to gains from its Vision Fund. Following the news about Son's AI chip project, shares of SoftBank rose by 2.8% on Monday.
In summary, Arm's successes translate directly into gains for SoftBank.
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