Japanese tech giant SoftBank (NASDAQOTH:SFTBY) continues to expand its global reach, and Bloomberg is now reporting that the company has accumulated a whopping $4 billion position in graphics chipmaker NVIDIA (NASDAQ:NVDA). The news comes less than a year after SoftBank acquired British chip architecture designer ARM Holdings for $32 billion, a deal that was announced last July and closed in September.
SoftBank closed funding for its massive $93 billion Vision Fund just days ago, which includes prominent investors such as Apple, Qualcomm, and the Public Investment Fund of the Kingdom of Saudi Arabia, among others. Vision Fund’s investment strategy is to “target meaningful, long-term investments in companies and foundational platform businesses that seek to enable the next age of innovation.” The investment vehicle has the right to acquire investments that have already been acquired by SoftBank, including 25% of its investment in ARM, as well as other investments including NVIDIA.
Bloomberg also points out that SoftBank can avoid regulatory reporting requirements if it keeps its stake under 5%. SoftBank is now the fourth-largest stakeholder in NVIDIA.
A $4 billion vote of confidence
If the report is accurate, then the investment represents a huge vote of confidence in NVIDIA. Indeed, shares have rallied to fresh all-time highs on the report, and NVIDIA’s market cap has now surpassed $80 billion. Given NVIDIA’s recent advances in areas like artificial intelligence and machine learning, which are driving financial results in its data center and automotive businesses, NVIDIA certainly fits the bill of what SoftBank and its Vision Fund look to invest in. (Data center revenue soared 186% last quarter to $409 million, representing over 20% of total sales.)
Vision Fund will “be active across a wide range of technology sectors, including but not limited to: IoT, artificial intelligence, robotics, mobile applications and computing, communications infrastructure and telecoms, computational biology and other data-driven business models, cloud technologies and software, consumer internet businesses and financial technology.”
From NVIDIA’s perspective, having the support and input of SoftBank will be valuable, even though the company didn’t directly receive any of its investment dollars. The shares were presumably purchased on the open market, as NVIDIA hasn’t conducted a secondary offering in years (it sold $2 billion worth of bonds in September of last year).
The news is just the latest development amid ongoing cross-pollination within tech. Chinese tech giants have also been funneling billions of dollars of investments into U.S. start-ups in recent years as a way to gain exposure to Western markets and a more diverse set of talent pools. China’s Tencent recently took a 5% stake in electric-car maker Tesla, for example.
Evan Niu, CFA owns shares of AAPL and TSLA. The Motley Fool owns shares of and recommends AAPL, Nvidia, QCOM, and TSLA. The Motley Fool has a disclosure policy.
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