Even SoftBank’s $100B Vision Fund Can Make Awful Investment Mistakes

SoftBank Group CEO Masayoshi Son.

SoftBank Group CEO Masayoshi Son. TOSHIFUMI KITAMURA/AFP/Getty Images

In the U.S., Japanese telecom giant SoftBank is famous is its tech investments. The company’s investment arm, the $100 billion Vision Fund, is not only the largest fund Silicon Valley has ever seen, but also widely considered the smartest. The Vision Fund has reaped huge returns from its early bets in tech superstars like Alibaba, Uber and WeWork. But, as it turns out, even the most resourceful investor can sometimes make awful mistakes.

On Wednesday, SoftBank disclosed in its quarterly earnings report that the Vision Fund had dumped its entire stake in Silicon Valley-based chipmaker Nvidia, worth over $3 billion, in January, a transaction which might have cost SoftBank as much as $1 billion.

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The Vision Fund acquired 4.9 percent of Nvidia in May 2017 for a reported $4 billion, according to stock analysis site Seeking Alpha. Nvidia stock was on a seemingly unstoppable rally at the time, thanks to its booming business of GPU, or graphics processing units, which were used by every major computer maker in the market.

The company’s media-shy founder and CEO, Jensen Huang, was even named by Fortune magazine as the “Businessperson of the Year” in 2017.

By the end of 2017, SoftBank’s Nvidia holdings had appreciated by 50 percent.

But before long, Nvidia’s rocketing stock seemed to hit a ceiling, especially in the second half of 2018. Since October last year, company shares have tumbled nearly half amid a broad market downturn, as well as its own disappointing earnings.

SoftBank didn’t cash out at Nvidia’s high point and chose to hold on to it both after the market meltdown in October and after the company missed Wall Street’s revenue estimate in November.

As of December 31, 2018, SoftBank’s position in Nvidia was valued at $3.63 billion. But the price at which it cashed out could be even lower.

In the last week of January, Nvidia shares took another hard fall of 18 percent after the company cut quarterly revenue guidance, citing “deteriorating macroeconomic conditions, particularly in China.”

SoftBank didn’t disclose whether it sold Nvidia holdings before or after the January dip. In either case, though, Nvidia would be a failed bet.

Even SoftBank’s $100B Vision Fund Can Make Awful Investment Mistakes