Eye On AI: As SoftBank Piles Up Losses, It Doubles Down On AI

Chris Metinko

This column is a look back at the week that was in AI. Read the previous one here.

It’s hard to write (or read) anything on artificial intelligence and startups right now without a mention of OpenAI.

We’ll be honest, we’re no better.

The ChatGPT creator’s current back-and-forth with everything-everywhere-all-at-once Elon Musk has turned into a never ending soap opera none of us asked for.

However, last week as Musk seemed to place his OpenAI offer on and off the table daily, something else OpenAI-related caught our eye — SoftBank reported a net loss of nearly $2.4 billion for its fiscal third quarter.

Yes, the same SoftBank that is reportedly planning to invest $19 billion into the White House’s proposed new $500 billion AI Stargate Project.

And yes, the same SoftBank that also plans to invest $40 billion into OpenAI at a mind-blowing $260 billion valuation.

That is a lot of dough to invest when many of your recent investments haven’t exactly panned out.

Case in point: During its earnings report, SoftBank said its famed Vision Fund unit — once known for shrewd investments in startups including Uber and DoorDash — lost about $2 billion as shares of companies like Coupang and Didi fell.

The Vision Fund loss is not new. In fact, SoftBank said it was pulling back on investments in 2022 — as both the venture market and its portfolio got rocked. However, in a quick turnabout, by mid-2023 founder Masayoshi Son told investors he would again shift from “defense mode” as the firm looks to be a leader in AI and robotics.

SoftBank has been true to its founder’s words when it comes to AI. In October, the Vision Fund reportedly agreed to invest $500 million in OpenAI’s $6.6 billion raise, led by Thrive Capital, at a post-money valuation of $157 billion.

In July, the multinational investment holding behemoth co-led robot brain building startup Skild AI’s $300 million Series A along with Coatue, Lightspeed Venture Partners and Jeff Bezos through his Bezos Expeditions. The deal valued Skild at $1.5 billion.

In May, SoftBank led London-based self-driving car startup Wayve’s round worth approximately $1.1 billion.

The Vision Fund has also participated in:

AI-powered search startup Perplexity’s $500 million Series D in December;
AI-powered in-app guidance startup Whatfix’s $125 million Series E in September;
AI-based search engine software developer Glean’s $260 million Series E; and
AlphaSense’s $650 million Series F at a $4 billion valuation.

The fund also made a strategic investment — of an undisclosed amount — in cloud security startup Wiz. Considering the cyber firm locked up $1 billion at a $12 billion valuation in May, it seems safe to assume that deal was not insignificant.

Those are just a sampling of the larger deals SoftBank took part in since its AI announcement — there are more AI-related investments in their transactions. However, based on recent history, it’s fair for one to wonder if there should be.

That’s not to suggest that SoftBank should halt its investments, but it does seem like the firm is repeating its past pattern of investing in the latest venture trends at extremely high valuations.

It didn’t work out great then. It is more than fair to wonder if the results will be any different this time.

Other things that caught our eye:

Back in September, AI research lab Safe Superintelligence raised $1 billion from a litany of big-name investors including Andreessen Horowitz and Sequoia Capital. Well, five months later, it’s back for more. The startup is in talks to raise another $1 billion in a round led by Greenoaks Capital Partners that would value the startup at $30 billion, Bloomberg reported. That’s a sixfold increase from the $5 billion it was valued at back in September, per Reuters. SSI, co-founded by OpenAI‘s former chief scientist Ilya Sutskever, is looking to develop safe artificial intelligence systems.