Not so long ago, things were looking bleak for SoftBank, the investment holding company headed by eclectic — and controversial — tech mogul Masayoshi Son. The Vision Fund, SoftBank’s venture arm, posted a $6.2 billion loss in Q2 2023, tied to WeWork and other unfortunate bets.
Arm to the Rescue
But — thanks in no small part to chip design house Arm — SoftBank’s fortunes appear to be turning around. While consensus remains mixed on the Vision Fund’s long-term prospects, it’s on the upswing for now — and what an upswing it is.
SoftBank took Arm public in September and still owns about 930 million shares, or 90%, of the chip company’s stock. Arm’s Blockbuster Quarter was a clear indication that the company is on the right track.
Arm’s Financials
- Revenue rose 14% to $824 million, beating the average analyst estimate of $761 million.
- Adjusted earnings per share came in at 29 cents, topping the average analyst estimate of 25 cents.
- The company projects revenue growth into the next quarter will be even stronger: 38%.
Investors rewarded Arm’s performance, driving the company’s stock price up as high as 57.4% on Wednesday. The chip company added about $38 billion to its market cap, more than $34 billion of which accrued to SoftBank.
As CNBC pointed out, SoftBank made more in Arm’s trading than the total amount it lost on now-bankrupt WeWork ($14 billion). This is a significant turnaround for SoftBank and a testament to the strength of Arm’s business model.
The AI Boom
Arm makes most of its money licensing the chips it designs to customers and charging royalties for each chip sold that uses its technologies. Arm’s bread-and-butter work remains mobile chips for devices like smartphones, tablets, and smartwatches; 35% of overall units shipped this quarter were smartphone-bound, according to Arm finance chief Jason Child.
However, an increasing share of the billions of chips Arm’s customers produce each quarter is hardware designed to accelerate AI workloads. Both Microsoft and Amazon, among others, are deploying custom-designed Arm chips to run AI models. So are countless startups in the expanding market for tailored AI chips.
While the bulk of Arm’s AI chip sales are indirect at present, often paired with GPUs in data centers, the company expects direct sales to increase as consumers buy new laptops and other devices with chip-accelerated AI features. In another boon for Arm, AI-supporting chips will command higher royalty revenues.
Arm charges roughly double the royalty rate for its latest processor architecture (v9) versus the previous generation. All this is music to SoftBank’s ears, I’d guess — particularly at a time when tempestuous U.S.-China relations have put a damper on the holding company’s investments in key Asian economies.
SoftBank’s Vision Fund Sees a Turnaround
Buoyed by Arm, SoftBank’s Vision Fund posted a profit after losing $14 billion on WeWork. This is a significant turnaround for SoftBank and a testament to the strength of Arm’s business model.
SoftBank took Arm public in September and still owns about 930 million shares, or 90%, of the chip company’s stock. With Arm’s financials looking strong, there is hope that SoftBank’s Vision Fund will see a turnaround as well.
Related News
- Microsoft Forms New Internal Dev-Focused AI Org: Microsoft has formed a new internal dev-focused AI org to develop and deploy AI models.
- OpenAI Presents Its Preferred Version of AI Regulation in a New ‘Blueprint’: OpenAI has presented its preferred version of AI regulation in a new ‘blueprint’, which outlines the need for clear guidelines and regulations around AI development and deployment.
The future is looking bright for SoftBank’s Vision Fund, thanks to Arm’s strong financials. As the company continues to invest in emerging technologies like AI and blockchain, there is hope that it will see continued growth and success.
Conclusion
SoftBank’s Vision Fund posted a profit after losing $14 billion on WeWork, thanks to the strength of Arm’s business model. With Arm’s financials looking strong, there is hope that SoftBank’s Vision Fund will see a turnaround as well.
As the company continues to invest in emerging technologies like AI and blockchain, there is hope that it will see continued growth and success. The future is looking bright for SoftBank’s Vision Fund, and with the right investments and strategies, there is no reason why it can’t continue to thrive.
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