SoftBank is seeking roughly $100 billion from Middle Eastern investors for a new fund that would buy established companies and upgrade them with AI and other advanced technologies, a departure from its earlier investment vehicles, which mainly put money into technology companies.
Masayoshi Son, SoftBank's leader, has approached influential Middle Eastern investors in recent weeks, including senior figures in the United Arab Emirates, according to reports. The fund would target businesses that have not yet adopted AI or robotics but could materially improve their operations and value by doing so, a relatively new way to profit from AI. SoftBank's robotics and physical AI division, Roze, would reportedly play a major role in those transformations, though the exact details remain unclear.
Son also intends to eventually take Roze public at a substantial valuation. Neither the establishment of the fund nor its financing is guaranteed at this point, and it is not yet clear whether the fund would only finance acquisitions or would also finance the development of Roze.
SoftBank has already committed approximately $65 billion to OpenAI, which remains the centerpiece of its investment strategy. The Japanese company has funded its investments through internal resources, outside capital, and borrowing partly secured by its holdings in Arm. SoftBank's financial health depends significantly on OpenAI's valuation, and OpenAI has yet to become a highly profitable company, though SoftBank continues to pursue aggressive AI expansion despite the risks tied to that valuation.
Middle Eastern sovereign wealth funds have backed Son before. Saudi Arabia's Public Investment Fund and Abu Dhabi's Mubadala took part in SoftBank's original $100 billion Vision Fund in 2017. Vision Fund 1 has accumulated about $29 billion in investment gains since it was established, while Vision Fund 2, which holds the OpenAI investment and is mostly financed by SoftBank, had generated $20.5 billion as of June. Abu Dhabi has also broadened its AI investments through MGX and G42.
Last month, SoftBank raised more than $11 billion in the largest junk bond issuance on record, with yields reaching 9.75%, a costly form of borrowing that reflects high risk. As of June, SoftBank's net asset value was 72.3 trillion yen, or $456.57 billion, and its loan-to-value ratio was 13%, well below its usual operating limit of 25%. A large share of its assets is nevertheless tied to technology companies including Arm and OpenAI, so a decline in their valuations could push the LTV to uncomfortable levels even without additional borrowing. Son's investment record includes Alibaba's enormous success and WeWork's 2023 bankruptcy, leaving the outcome of the current strategy uncertain.
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