Heavy losses for SoftBank: Billions in value destroyed

The Japanese technology giant SoftBank Group experienced an unprecedented plunge on Monday. The company's market capitalization dropped by $15 billion, marking the largest single loss since its IPO by founder Masayoshi Son in 1998. SoftBank's stock fell by 19%, resulting in a total quarterly decline of 38% for September—the steepest drop since 2001. This dramatic loss in value coincides with Son's plans for an aggressive investment strategy in the fields of artificial intelligence and semiconductor technology. The global market downturn could also heavily impact SoftBank's Vision Fund unit, which is invested in hundreds of technology startups. According to the Bloomberg Billionaires Index, Son's personal wealth shrank by $2.9 billion in just that day. Over the past three trading days, he lost over $5 billion of his wealth, erasing much of his gains for the year. This makes him one of the most affected tycoons in Asia. "The hype around AI is fading as the focus shifts more towards the ability of AI companies to drive revenues and profits," Bloomberg Intelligence analysts Marvin Lo and Chris Muckensturm wrote. "SoftBank's AI investment strategy could help the company achieve profitability, but the execution risk is high." The Topix and the Nikkei 225 plummeted by 12% on Monday, driven by a strengthening yen, tighter monetary policy, and deteriorating economic outlook in the U.S. SoftBank is set to announce its quarterly results on Wednesday, with low earnings expected. "The sell-off is overdone," commented Kirk Boodry, an analyst at Astris Advisory. "The last time SoftBank was traded like this was during the capitulation trade when Covid fears flooded the markets and the discount to net asset value temporarily reached almost 70%." According to Boodry, the discount has now widened to 57% as markets consider higher volatility and risks for SoftBank investments. The price drop is not solely due to the technology sector but also reflects growing concerns over a stronger yen and geopolitical risks in the Middle East.