SoftBank’s $5.8b Nvidia sell-off sparks AI valuation fears

• Mood follows recent warnings from Morgan Stanley and Goldman Sachs chiefs about potential downturns and a high-profile short against Nvidia and Palantir.

SoftBank Group’s surprise $5.8 billion sale of its entire Nvidia stake jolted markets on Tuesday, highlighting growing investor unease that the red-hot artificial intelligence sector may be cresting after rapid gains and recent caution from top Wall Street leaders.

The Japanese tech conglomerate revealed in quarterly results that it exited its 32.1 million Nvidia shares in October, timing the sale to fund CEO Masayoshi Son’s sweeping ambitions in AI—most notably, the $500 billion Stargate data centre project in the US and a mammoth commitment of up to $40 billion for OpenAI, the creator of ChatGPT. Financing specifics for these AI initiatives were not disclosed.

Bubble fears

Market response was swift. Nvidia shares tumbled more than 2 per cent early Tuesday, dragging the S&P 500 lower. Concerns were amplified by CoreWeave, an AI cloud provider, which slashed its revenue forecast due to contract delays—sending its stock down 9 per cent.

The mood follows recent warnings from Morgan Stanley and Goldman Sachs chiefs about potential downturns and a high-profile short against Nvidia and Palantir from Michael Burry, famed for his bets before the 2008 financial crisis.

The sale has led some analysts to wonder whether Son, famous for audacious technology investments, is signaling that the AI-driven rally responsible for Nvidia’s transformation into a $5 trillion company last month is cooling. Nvidia shares have soared over 1,200 per cent in three years, fueled by the AI boom.

SoftBank’s moves also revive scrutiny of its checkered history with Nvidia. The company previously missed out on over $100 billion in gains by selling shares in 2019, only to repurchase them as demand spiked.

Alongside Nvidia, SoftBank sold about $9.2 billion in T-Mobile shares, amassing capital for bets on AI applications, OpenAI, and the infrastructure underpinning massive next-gen projects like Stargate.

Tighter ties to OpenAI

This deeper commitment comes as SoftBank recovers from huge losses in its Vision Fund and leans harder into OpenAI, which may be eyeing a $1 trillion public listing as early as next year—potentially transforming Microsoft and SoftBank’s fortunes.

Soaring OpenAI valuations buoyed SoftBank’s second-quarter net profits, which more than doubled. However, OpenAI has provided little clarity on plans to finance its AI infrastructure ambitions, reportedly totaling $1.4 trillion. While the firm forecasts $20 billion in annual recurring revenue this year, it has recently backed away from seeking government-backed loans.