SoftBank Is Trading Cheap, And That Could Be An Opportunity

Masayoshi Son’s investment holding company is invested chiefly in tech and telecom – and is a key player in the Stargate Project. Here's an in-depth review.

One thing to know right off the bat is that SoftBank isn’t a bank at all: it’s an investment holding company with a massive $230 billion portfolio, mostly in AI, tech, and telecom. Some of its assets are publicly traded, but others are private.

And at the center of it all is its bold and enigmatic founder, Masayoshi Son, who owns about a third of the company. Understanding him is essential to understanding SoftBank Group – and why it trades for so much less than its net asset value.

For investors, though, the bigger question now is whether that discount is a red flag or an enticing investment opportunity. Let’s take a look.

Thesis

• SoftBank Group is an investment company with a portfolio packed with tech and telecom. The group’s biggest investment is Arm Holdings – it owns around 88% of the outstanding shares of the British semiconductor and software design company (a stake worth about $146 billion). It’s also got a chunky $26 billion holding in Japanese telecom SoftBank KK, $23 billion in US telecom T-Mobile, and $62 billion in its Vision Funds capital venture pot.

• SoftBank Group founder and CEO Masayoshi Son owns about 30% of the company’s shares and oversees its strategic decisions. His focus now is AI – which is why SoftBank is the lead financier in the $500 billion Stargate Project, working alongside OpenAI and Oracle to build AI infrastructure across the US.

• SoftBank has been working to strengthen its position in the semiconductor industry. As part of that, Arm has announced plans to launch its own in-house chip later this year, and Meta has lined up to be one of its first customers. And that move – from designing chips to making a complete processor – marks a serious shift.

• Now, the talk around the market is that SoftBank and Arm are close to buying semiconductor design company Ampere for $6.5 billion. Ampere designs Arm-based processors, so the idea is that by integrating the firm into its portfolio, SoftBank could boost its influence in the growing market for the energy-efficient server chips that are essential to cloud applications and data centers.

• The simplest way to invest in SoftBank (assuming you don’t have access to the local Japanese stock market) is via its American Depository Receipt. And SoftBank’s ADR has recently been trading around $32. That’s nearly a 58% discount to the $78 net asset value per ADR. What’s more, SoftBank’s stake in Arm alone is worth around $44 per ADR. That math makes this an interesting idea. Buying a company when it's trading below its intrinsic value is known to be a successful investment strategy (folk like Warren Buffett have made fortunes doing exactly that).

• SoftBank could be a cheap, back-door way to invest in Arm, and would also give you exposure to its other investments at a significant discount to their net asset value.

• One pro strategy is to buy SoftBank and “short” (or bet against) some or all of its exposure in Arm as well as its other holdings. The move would allow you to benefit if the gap between SoftBank’s price and its net asset value (NAV) starts to close.

Risks

• A fall in Arm’s share price could really rattle its owner SoftBank, since the British chip designer is a big contributor to the holding company’s value. And Arm’s stock is expensive: it’s got a 60x price-to-earnings ratio, based on consensus estimates for the fiscal year ending in March 2027 – so there is little room for disappointment.

• A drop in the value of SoftBank’s other investments could also rock the boat – that includes the Vision Fund, SoftBank Corp., and T-Mobile.

• Masayoshi Son could make some reckless investment decision – he’s done so before – and that could see the current discount to NAV move even wider.

• A big downward change in the outlook for AI’s potential or corporate spending on AI could cause Arm’s earnings to fall – which could trigger a fall in SoftBank’s share price.

• A sharp increase in US or Japanese interest rates would lead to higher interest payments for SoftBank, and potentially undermine the value of some of its tech investments.