SoftBank Group’s founder, Masayoshi Son, is setting the stage for an audacious venture with a hefty price tag of $100 billion. Codenamed Izanagi, this project is poised to challenge Nvidia’s dominance in the realm of artificial intelligence (AI) chips, according to a recent Bloomberg report. Son’s vision involves creating a new entity that will collaborate with Arm, a chip design company previously spun off by SoftBank.
In a strategic move reminiscent of the Vision Fund’s formation, SoftBank intends to secure approximately $70 billion from Middle Eastern institutional investors, mirroring its prior successful funding model. The remaining $30 billion will be injected directly by SoftBank into the endeavor. Despite requests for clarification, a SoftBank spokesperson declined to comment on the report.
Nvidia currently holds a firm grip on the AI chip market, particularly with its Graphics Processing Unit (GPU) chips. However, the escalating demand for AI processors and the ongoing quest for enhanced efficiency and cost-effectiveness present an opportunity for competitors to emerge. Whether through comparable GPUs, innovative GPU approaches, or entirely novel processing methods, the field is ripe for disruption.
Interestingly, OpenAI CEO Sam Altman is reportedly in discussions with investors in the United Arab Emirates for a separate AI chip project. Altman aims to raise a substantial $5 trillion to $7 trillion for this initiative. As a significant consumer of AI chips, OpenAI’s endeavors with GPT models, including ChatGPT, underscore the increasing importance of AI hardware in cutting-edge technologies.
SoftBank’s Izanagi project aligns with the company’s strategic shift towards artificial intelligence, marking a departure from its reliance on Alibaba for substantial returns. Historically, SoftBank’s early investments and stake in Alibaba yielded over $70 billion in returns. However, since CFO Yoshimitsu Goto’s announcement in March 2023 about preparing for the AI revolution, SoftBank has gradually divested some of its Alibaba stake to redirect funds into AI initiatives.
The move into AI can be viewed as both offensive and defensive, considering SoftBank’s significant loss of $32 billion in the Vision Fund about a year before the strategic shift. Despite setbacks, SoftBank, fueled by its 90% stake in Arm, has experienced a remarkable recovery. The Vision Fund posted its highest return in the recent quarter since March 2021, and Arm’s stock witnessed a nearly 50% surge due to the escalating demand for AI chips.
Arm, acquired by SoftBank in 2016 for $32 billion, went public on the Nasdaq exchange in September 2023, with a valuation of $64 billion. The company’s clientele extends beyond Nvidia to include tech giants such as Apple, Google, Microsoft, and Amazon, all contributing to the growing demand for large language models.
With the revelation of Son’s AI chip project, SoftBank shares closed 2.8% higher, signaling the market’s approval of this bold and strategic leap into the burgeoning field of artificial intelligence.
Source: TechCrunch