SoftBank Group has recently stirred the financial waters with its third-quarter report for the fiscal year 2024, released on a Wednesday that many industry watchers will not soon forget.

The financial report revealed an unexpected loss of 369.2 billion yen (approximately 2.4 billion USD) for the quarter, a stark contrast to the profit of 950 billion yen reported in the same period last yearThis result sharply diverged from the LSEG SmartEstimate, which had projected a net profit of 234 billion yenSuch a drastic performance swing has undoubtedly cast a shadow over SoftBank's prospects.

Delving deeper into the reasons behind this loss, the lackluster performance of its Vision Fund emerged as the primary culpritDuring this quarter, the Vision Fund recorded an investment loss of 352.75 billion yen, ending a streak of two consecutive profitable quarters

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Extending the analysis to encompass the broader Vision Fund sector, accounting for management costs, currency fluctuations, and other factors, the combined losses amounted to 309.93 billion yenDissecting the impact by sub-funds reveals that Vision Fund 1 experienced disappointing outcomes, with its publicly traded portfolio companies exhibiting a quarter-on-quarter value decline of 2.1%. This depreciation was primarily driven by the falling share price of the e-commerce giant Coupang, which also dampened the valuation of private investments by 3.3%. Meanwhile, Vision Fund 2 faced a similar plight, seeing a fair value drop of 3.7% compared to the previous quarter-end, with losses from stocks of electric vehicle manufacturer Ola Electric Mobility and warehouse automation firm AutoStore offsetting the rise in stock price of food delivery company Swiggy post its November 2024 IPO.

Despite these disappointing quarterly results for SoftBank, it is somewhat surprising to note that its share price has risen by approximately 16% over the past yearPreviously, optimism surrounding Arm's collaboration with NVIDIA in AI chip design had propelled SoftBank's stock to historic highsThis indicates a lingering investor confidence in SoftBank’s long-term growth potential, even as short-term performance fluctuates, showcasing a strong belief in its technological investments.

Nevertheless, the soft performance has raised eyebrows among analysts, now worried that these results might intensify skepticism regarding Masayoshi Son’s extensive investments in AI decisionsFor a long time, Son has exhibited faith in the potential of artificial intelligence and has actively positioned his company within this domain

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Currently, SoftBank is nearing a significant $40 billion investment into OpenAI, which would elevate OpenAI's valuation to $260 billionShould this deal finalize, SoftBank would surpass Microsoft as the largest backer of this AI startup.

In addition to the monumental investment in OpenAI, Son also plans to collaborate with OpenAI on a colossal project dubbed "Gateway to the Stars," which is aimed at developing advanced AI infrastructureThis ambitious project is projected to entail investments nearing $500 billion over the next four yearsSoftBank is expected to contribute around $15 to $20 billion at the outset, with potential for further fundraising through project financing methodsThe "Gateway to the Stars" initiative seeks to establish a robust AI backbone, underpinning technological advancements in AI while promoting vast applications and innovative growth on a global scale.

Son’s series of investment strategies undoubtedly demonstrate his unwavering belief in the AI sector and long-range planningHe sees AI as the future’s driving force, and through large-scale investment and partnerships, SoftBank hopes to secure a leading position in this transformative arenaHowever, the recent losses from the Vision Fund compel the market to acknowledge the risks associated with these investmentsAfter all, the uncertainties inherent in the AI sector are considerable, with rapid technological evolution, fierce competition, and extended timelines for investment returns.

For SoftBank Group, the future is rife with both challenges and opportunities

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