SoftBank profit more than doubles to $16.6 billion on OpenAI gains

(Reuters) - Japan's SoftBank Group (9984.T) reported on Tuesday its second-quarter net profit more than doubled to 2.5 trillion yen ($16.6 billion), driven by valuation gains in its holdings of OpenAI.

Three analysts surveyed by LSEG had estimated on average a net profit of 207 billion yen for the July-September quarter. The company's profit also compared with the 1.18 trillion yen profit it made in the same period of the previous year.

SoftBank's Vision Fund unit posted an investment gain of 3.5 trillion yen, primarily deriving from the group's holding in ChatGPT creator OpenAI which totalled 2.16 trillion yen for the quarter.

The results coincide with a bull run in technology-related stocks that has sent SoftBank's share price to record highs.

As the wave of investment in artificial intelligence infrastructure such as data centers continues apace and frontrunners in AI development such as OpenAI project rapid growth, SoftBank has been a major beneficiary.

Nevertheless there are growing concerns among investors about an "AI bubble", whereby the enormous sums committed to capital investment by leading firms may not generate the high profits to justify the investments.

In March SoftBank agreed to lead a funding round of up to $40 billion in OpenAI at a valuation of $300 billion. In October, a source told Reuters SoftBank was among a consortium of investors acquiring $6.6 billion worth of shares from OpenAI employees at a higher valuation of $500 billion.

SoftBank is in the midst of massive AI-related investments, its most ambitious investments since the launch of the Vision Fund vehicles in 2017 and 2019, and it is in need of funding.

In October, it sold 32.1 million shares of Nvidia (NVDA.O), including those held by the asset management subsidiary, for $5.83 billion.

Since the start of April it has issued bonds in three currencies worth 620 billion yen, $2.2 billion and 1.7 billion euros, respectively.

It also took out a bridge loan of $8.5 billion for its investment in OpenAI and arranged a $6.5 billion bridge loan for its acquisition of semiconductor design company Ampere, which it has not yet drawn.

SoftBank founder and chief executive Masayoshi Son is experienced in making leveraged bets on what he sees as transformative technologies, but his track record is mixed.

While an early bet on Chinese e-commerce site Alibaba (9988.HK) proved lucrative, other bets have gone awry, such as shared office provider WeWork.

($1 = 150.7800 yen)