Masayoshi Son is a legendary investor from Japan, best known for founding the technology-focused holding company SoftBank Group. With hundreds of billions in assets under management, SoftBank hasn't been shy about getting involved in the artificial intelligence (AI) revolution.
Perhaps unsurprisingly, the investment firm took a sizable position in Nvidia (NVDA 1.49%) over the last several years, and benefited handsomely from the chip designer's influence in the AI landscape.
However, last month, investors learned that SoftBank had sold its entire stake in Nvidia -- netting nearly $6 billion in proceeds. While this move initially led some to question whether SoftBank had lost confidence in Nvidia, Son recently put those fears to rest.
NASDAQ: NVDA
Key Data Points
What did Son say about Nvidia?
Earlier this month, an organization called the Future Investment Initiative held a summit in Tokyo that featured a number of business leaders and entrepreneurs. During one of the presentations, Son was asked about the rationale behind SoftBank's sale of Nvidia stock.
He got straight to the point, replying that he respects Nvidia's visionary CEO, Jensen Huang. He followed up by saying he hadn't wanted to sell a "single share" and joked that he was "crying" over the investment decision.
To me, it sounds like Son still thinks quite highly of the chipmaker. While this should ease shareholders' concerns, we still need to uncover exactly why SoftBank ultimately decided to make this tough decision.
Image source: Nvidia.
Why did SoftBank sell its entire Nvidia stake?
Shortly after the inauguration of President Donald Trump back in January, a small team of business leaders assembled at the White House to announce Project Stargate. In essence, it's a joint venture between Oracle, SoftBank, and OpenAI that is expected to invest $500 billion into building AI infrastructure in the U.S. over the next four years.
Alongside this initiative, SoftBank pledged to invest up to $40 billion in OpenAI. According to SoftBank's filings, the fund is expected to make a $22.5 billion investment into the ChatGPT developer by the end of the year, bringing its total to $30 billion.
In addition, SoftBank invested $2 billion in Intel in August. This deal was followed up by a subsequent $5 billion commitment from Nvidia to Intel in September.
Lastly, SoftBank spent about $12 billion this year to acquire semiconductor designer Ampere Computing and the robotics division of ABB.
In short, it's clear that SoftBank is not going all-in on any particular theme in AI. It's exposed to many niches in the AI space, including chips, generative AI, data centers, CPUs, and robotics. Against this backdrop, SoftBank apparently had to make the tough choice to take its profits from Nvidia off the table in order to fund its other efforts.
Image source: Getty Images.
Is Nvidia stock a good buy right now?
As of Dec. 11, Nvidia sported a 1-year forward price-to-earnings (P/E) multiple of 24. For reference, until recently, the company had not traded at this level since it plunged in January.
This year's compression in Nvidia's valuation can be ascribed to the following factors:
- Widening fears among investors that AI stocks are in a bubble;
- The introduction of Alphabet's competing AI accelerator chips, which it calls Tensor Processing Units;
- Rising competition for its GPUs from Advanced Micro Devices' GPUs, as well as custom-designed application-specific integrated circuits from other tech giants.
While each of these concerns is reasonable, I think the ongoing sell-off in Nvidia has gotten overblown. The company remains well positioned to capture accelerating capital expenditures from the hyperscalers and others for the time being.
In addition, Nvidia recently struck a number of alliances with Anthropic, Palantir Technologies, and Nokia -- each of which opens up new doors and expands the company's addressable market.
Given these dynamics, I think this is a great opportunity for investors with long-term time horizons to pounce on Nvidia and buy the dip as the infrastructure chapter of the AI story continues to unfold.
