SoftBank reports $7.1 billion quarterly loss as AI investment concerns weigh

New Delhi: Japanese investment giant SoftBank Group has reported its first quarterly net loss in nearly two years as falling valuations of key technology holdings and growing concerns over artificial intelligence (AI) investments weighed on its financial performance.

The company posted a net loss of 1.12 trillion yen ($7.1 billion) in the second quarter of its financial year, reversing a profit recorded in the corresponding period a year earlier.

The performance was significantly below market expectations with analysts polled by the company estimating an average profit of 129 billion yen.

Declines in the share prices of semiconductor companies Arm Holdings and Intel, along with South Korean e-commerce major Coupang, contributed to the deterioration in SoftBank's financial performance.

Its Vision Fund division -- which manages investments in hundreds of technology startups -- also reported a loss of 81.6 billion yen.

SoftBank has increasingly emerged as an indicator of investor sentiment towards OpenAI and the broader AI industry, given its substantial exposure to the sector.

Moreover, the company's shares have fallen more than 50 per cent from their record high in June amid concerns over the debt burden associated with its aggressive AI investments and uncertainty surrounding the future returns from these commitments.

The changing valuation expectations have heightened concerns about the sustainability of investments in the AI sector and the potential risks associated with assets that are not publicly traded.

"The market is pricing the chance that the next mark -- or the next headline about OpenAI's revenue -- changes the value of an asset that cannot be sold at a screen price," independent researcher Nico Rosti wrote in a note ahead of SoftBank's earnings.

SoftBank founder Masayoshi Son's growing reliance on debt markets to finance the company's expanding AI investment commitments has also raised concerns among investors.

The company's bonds have come under increased scrutiny, while the cost of insuring its debt against default, reflected in credit default swaps, has risen to its highest levels in years.

In addition, SoftBank held an approximately 13 per cent stake in OpenAI at the beginning of October.

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