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SoftBank faces substantial cash needs in current quarter,

analysts say

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SoftBank's shares fell as much as 10% after Nvidia ( NVDA ) stake

sale

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SoftBank's Vision Fund CFO highlights AI revenue

generation to

counter "bubble" fears

By Anton Bridge

TOKYO, Nov 12 (Reuters) - SoftBank's shares

slid as much as 10% on Wednesday after the $5.8 billion sale of

its stake in Nvidia ( NVDA ) highlighted the growing funding

demands it faces to bankroll its "all-in" bet on ChatGPT creator

OpenAI and other investments.

The conglomerate needs to fund a $22.5 billion follow-on

investment in OpenAI, is acquiring chipmaker Ampere in a $6.5

billion deal and has agreed to buy the robotics business of

Swiss group ABB for $5.4 billion.

Analyst Mary Pollock at CreditSights estimates SoftBank has

committed to at least $41 billion in recent spending on

investments and purchases. Its cash position totalled 4.2

trillion yen ($27.86 billion) at the end of September.

SoftBank's cash needs in the current quarter are

"substantial", Pollock wrote in a note.

"Though SBG's liquidity position has improved relative to

when it issued its hybrids in October, we still estimate it will

need to be proactive funding its recent (more than) $41 billion

investment spend," she wrote.

The share drop also comes amid investor concerns about the

risk that rapidly rising tech valuations are overextended, even

as SoftBank moves to deepen its exposure to the AI sector.

SoftBank said on Tuesday it sold the Nvidia ( NVDA ) stake and also

sold T-Mobile US ( TMUS ) shares for $9.2 billion between June

and September.

SoftBank's founder and CEO Masayoshi Son, who is known for

his risk appetite and aggressive investing style, is bullish on

the outlook for artificial intelligence.

"I do not think SoftBank has a negative view on Nvidia ( NVDA ),"

said Rolf Bulk, analyst at New Street Research.

"The position was large, liquid, and easy to monetise, and

likely SoftBank sees even more upside in reallocating capital to

OpenAI."

In June, Son said corporate winners grow stronger over time,

scooping up profits, and made a comparison with firms such as

Alphabet's Google and Amazon ( AMZN ).

SoftBank's shares have had a blistering run, more than

quadrupling between April and October, but have pared gains in

recent days.

On Wednesday, the shares recouped some of their earlier

losses and ended the day down 3.46%. Shares in Nvidia ( NVDA ) and chip

designer Arm, which is controlled by SoftBank, fell 3%

overnight.

FUNDING NEEDS

In addition to selling shares, SoftBank has issued bonds and

taken out loans to support its investments.

SoftBank took out a $8.5 billion loan for its OpenAI backing

and arranged a $6.5 billion bridging loan for its acquisition of

Ampere, which it has not yet drawn.

Since the start of April, SoftBank has also issued bonds in

three currencies worth 620 billion yen ($4.11 billion), $2.2

billion and 1.7 billion euros ($1.98 billion), respectively.

SoftBank's loan-to-value ratio, a measure of indebtedness,

was 16.5% at the end of September, down from 17% in the previous

quarter. However, SoftBank CFO Yoshimitsu Goto said at an

earnings briefing on Tuesday that the end of September level was

"actually a bit too safe".

Despite the increasing overvaluation concerns, Navneet

Govil, CFO at SoftBank's Vision Fund investing arm, emphasised

that growing demand for AI services validates their investment

thesis.

"What's different between the dotcom boom and today is that

AI companies are generating meaningful revenues," Govil told

Reuters after its earnings release on Tuesday.

"There's a lot of talk about capex spend, but it's actually

driven by demand," he said.

($1 = 150.7800 yen)