SoftBank's $5.8 Billion Nvidia Exit Sparks AI Bubble Fears

Tokyo, Japan: Masayoshi Son's sudden departure from Nvidia has sent shockwaves through global markets, with SoftBank Group shares plunging as much as 10% after the Japanese conglomerate revealed it sold its entire stake in the US chip giant for $5.83 billion. The capital will be used to fund SoftBank's $22.5 billion investment in ChatGPT parent OpenAI, according to sources familiar with the matter.

SoftBank's decision to unload 32.1 million Nvidia shares in October represents a dramatic pivot for Japan's richest man, who has long positioned himself at the forefront of artificial intelligence investment. The move comes as investors increasingly question whether the AI sector is experiencing bubble troubles, with uncomfortable echoes of the early 2000s dot-com era.

Michael Burry, the investor made famous by "The Big Short," is betting against AI, contending that tech companies are padding AI-related profits through creative accounting. "Understating depreciation by extending useful life of assets artificially boosts earnings — one of the more common frauds of the modern era," Burry wrote on social media.

Goldman Sachs strategist Dominic Wilson sees growing risk that imbalances similar to those that built up in the 1990s are becoming more visible as the AI investment boom extends. "Profitability peaked well before the boom ended," Wilson notes, drawing parallels with the dot-com bubble when corporate profits reached their peak around 1997, just before the crash.

The broader market reaction has been swift and severe. Beyond SoftBank's 10% plunge, semiconductor testing equipment maker Advantest and chip production equipment maker Tokyo Electron both slipped over 2%. Taiwan's TSMC, the world's largest contract chipmaker, fell 0.34%, while South Korean memory chip giant SK Hynix dropped 1.62%.

SoftBank's chief financial officer Yoshimitsu Goto defended the move during an investor presentation, stating: "We want to provide a lot of investment opportunities for investors, while we can still maintain financial strength." The company also trimmed its T-Mobile position, raising $9.17 billion.

This isn't SoftBank's first exit from Nvidia. The company's Vision Fund was an early supporter, reportedly building a $4 billion stake in 2017 before fully divesting in January 2019. Despite the latest sale, SoftBank remains closely tied to Nvidia through its broader business interests, particularly its controlling stake in UK-based Arm Holdings, whose chip designs power mobile and AI processors.

Dan Ives, global head of technology research at Wedbush Securities, views the move as a bullish signal. "This is a bullish signal on the theme from SoftBank doubling down and not a bearish sign in our view," Ives said.

Yet Son's pivot raises fundamental questions about AI valuations at a time when even former US Council of Economic Advisers head Jared Bernstein acknowledges the gap between AI earnings potential and spending "certainly looks bubbly." The decision by a man who claims to operate on a 300-year time horizon to step away from a $4.7 trillion company at the center of the AI revolution suggests either strategic repositioning or a warning signal about the sector's sustainability.

As the AI investment cycle accelerates, Son's departure from Nvidia may herald either the next phase of the AI era or signal that the bubble warnings from financial veterans like Burry deserve closer attention from global investors navigating this technological transformation.

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