Nvidia’s 50% Plunge From Its Peak May Be Causing a Headache for Softbank’s Vision Fund
To see the problems that Nvidia’s stock plunge since early October is causing for its shareholders, look no further than Softbank.
Softbank has drawn headlines during the past year for its ambitious Vision Fund, a massive $100 billion fund engineered by CEO Masayoshi Son. The fund has invested in a number of tech companies—including Nvidia, WeWork, Uber and Slack. The idea behind it was to get in early on companies that will be reshaping technology for the next 100 years. But the fund also made Softbank something of a new power broker in Silicon Valley.
According to Bloomberg, Softbank is considering selling off some or even all of its stake in Nvidia early next year—more than 98 years short of its 100-year vision. The reason may have something to do with Nvidia being caught in the downdraft that has hurt the valuations of many tech stocks. Nvidia has also said a “crypto hangover” is hurting its growth prospects, and analysts expect the recovery from that hangover to take up to a year.
Softbank reported that the valuation of its Vision Fund in the September quarter had increased by ¥504 billion ($4.5 billion) year over year, with much of that increase due to its investment in chipmaker Nvidia. Since Oct. 1, however, Nvidia has lost 50% of its value, potentially delivering a blow to the Vision Fund that its biggest investors, notably sovereign funds in the Middle East, may not welcome.
Bloomberg quoted sources as saying the investment could yield Softbank $3 billion. In the past ten weeks, Nvidia has given up nearly all of the stock gains it earned since it was reported that Softbank bought a stake in the chipmaker. Should the stock—long beloved by speculators, who tend to grow fickle during market selloffs—continue to decline into 2019, it could prompt Softbank to part with a stock that was one of its prized investments only a few short months ago.