On August 5, Beijing time, the Japanese stock market plummeted on Monday, dragging SoftBank Group to its largest single-day decline since the company's listing in 1998, and its market value evaporated by US$15 billion (approximately 107.1 billion yuan). SoftBank's stock price plunged 19% on Monday, bringing the cumulative decline in the third quarter to 38%, which is expected to be the largest quarterly decline since 2001.
The plunge comes as SoftBank founder Masayoshi Son prepares to make big investments in AI and semiconductor technology. The turmoil in global stock markets could also hit SoftBank's Vision Fund unit, which invests in hundreds of technology startups.
"The AI hype boom is fading as people focus more on the revenue generation and profitability of AI companies," Bloomberg Intelligence analysts Marvin Lo and Chris Muckensturm said in the report. "SoftBank's AI investment strategy may help the company return to profitability, but execution risks are high and may not be smooth sailing."
On Monday, affected by the appreciation of the yen, tightening of monetary policy and the deterioration of the U.S. economic outlook, the Topix and Nikkei 225 indexes plummeted 12% each. SoftBank is due to report quarterly earnings on Wednesday and is expected to post a small profit.
"The stock market sell-off is excessive," said Kirk Boodry, an analyst at investment company AstrisAdvisory. "The last time SoftBank encountered such a transaction was a capitulation transaction. When the new crown epidemic panic swept the market, the discount to its net asset value was close to 70%." Boudry said that as market volatility and SoftBank investment risks increase, the discount has now expanded to 57%. He added that today's stock market decline was not entirely related to technology stocks, but reflected growing concerns about the strong yen and geopolitical risks in the Middle East.