SoftBank Says Goodbye to Alibaba, Hello to More AI Investments

In the fiscal year ended March 31, SoftBank cut its investments to about $3 billion, less than a 10th of its investments the previous fiscal year. It had said it was playing defense after many of its investments in startups went sour during the recent tech downturn.

More recently, performance at SoftBank’s technology-focused Vision Funds has brightened, said SoftBank Chief Financial Officer Yoshimitsu Goto on Thursday as the company released earnings.

“Markets are calmer now and we saw signs of improvement in the last quarter," Mr. Goto said. “Solid defense is now in place and we are getting ready to go on the offensive with the AI revolution on the horizon."

Mr. Goto spent a good portion of his presentation praising ChatGPT, the artificial-intelligence chatbot developed by Microsoft-backed research company OpenAI.

Mr. Goto said SoftBank Chief Executive Masayoshi Son—who has stopped attending his company’s quarterly financial presentations—has been dedicating time to studying SoftBank’s approach to artificial intelligence and working on plans for the listing of its chip-design unit, Arm.

“AI has finally come, especially generative AI," Mr. Goto said. SoftBank’s chief executive “is as excited today as when he launched the company," he said.

SoftBank is turning to AI as it says goodbye to Alibaba, the most successful investment in Mr. Son’s more than four-decade career. He backed Alibaba in its infancy in 2000, and as recently as mid-2021 SoftBank’s stake in the Chinese company was worth the equivalent of nearly $100 billion.

In recent years, SoftBank has cashed in its Alibaba holdings through financing deals that handed it money upfront while leaving it the option of keeping the shares later. Ultimately it has given up many of the shares outright, and Mr. Goto said virtually all of SoftBank’s remaining Alibaba shares have been used to procure funds.

Over the past year, SoftBank’s stake in Alibaba has helped ride out losses in its two Vision Funds. After posting a record loss equivalent to more than $20 billion in the April-June quarter, SoftBank reported an equally large profit in the quarter ended in September thanks to profits from Alibaba transactions.

Overall, for the year ended March 31, SoftBank lost $7.2 billion, smaller than its $15.6 billion loss a year earlier.

Mr. Goto said SoftBank’s unwinding of its stake in Alibaba was part of broader efforts to diversify its investments across companies and regions of the world. Mr. Goto said the company has put more priority on investing in the U.S. and Europe as it looks to minimize geopolitical risks related to U.S.-China frictions and the war in Ukraine.

China accounted for 14% of the equity value of SoftBank’s holdings as of March, down from 50% two years earlier, driven by the Alibaba unwinding.

Mr. Goto said Mr. Son was excited at how ChatGPT achieved 100 million monthly average users in just two months.

“I spend time with him every day," Mr. Goto said of his boss, “and I try not to be overwhelmed by him too much."