By Eliot Brown
Tech investing heavyweight Masayoshi Son offered a gift to President-elect Donald Trump: a pledge to spend $100 billion on artificial intelligence and related technology in the U.S.
"President Trump is a double-down president," he said Monday, standing next to Trump at a Mar-a-Lago press conference -- a reference to how his commitment was twice the $50 billion he pledged at a similar event eight years ago.
Left unmentioned: Son, the chief executive of tech conglomerate SoftBank Group, doesn't have $100 billion. Following through will require Son to embark on some combination of a massive fundraising effort, a huge amount of new debt or selling chunks of the company's holdings to raise cash.
Son showed he is eager to make a big splash as CEOs, investors and others are lining up to pay homage to Trump and publicly lavish praise.
Last week, a burst of companies and CEOs agreed to give $1 million donations to Trump's inaugural fund, including Meta, Amazon.com and OpenAI founder Sam Altman, who once said Trump's principles represent an "unacceptable threat to America." Marc Benioff, owner of Time magazine and CEO of Salesforce.com, congratulated Trump on becoming Time's person of the year, saying it "marks a time of great promise for our nation."
Regulatory moves by the Trump administration could lead to massive swings in value for the tech sector. The industry is highly dependent on federal policies in areas including global trade, mergers, foreign investment and cryptocurrency. Many tech companies have multibillion-dollar contracts with government agencies, and Trump in his first term publicly attacked some tech leaders on social media.
Son's commitment Monday was light on detail, with the billionaire giving few numbers beyond saying the money would create 100,000 jobs in four years. Trump asked him to double it to $200 billion on the spot.
"I will really try," Son said. "I'll need your support, though."
SoftBank's interests with the U.S. government are varied. The company took a big hit when a planned merger between SoftBank-owned Sprint and T-Mobile ran into resistance from the Obama administration. It then benefited when the first Trump administration eventually approved it.
Today its largest asset is Arm, which designs components of chips -- a sector affected by U.S. subsidy levels, tariffs and policy around Taiwan and China.
SoftBank has a stake in ByteDance, which is facing a potential U.S. ban of TikTok if it doesn't sell or change ownership of the app by January. At the press conference Monday, Trump said he would "take a look at TikTok."
SoftBank owns stakes in numerous companies in the field of autonomous vehicles -- another area where Trump advisers want to change federal rules.
Just as in 2016, the investment pledge that Son attributed to Trump's election "largely echo what SoftBank had already been planning," Kirk Boodry, an analyst at Astris Advisory, said Tuesday. He called it a "repackaging" of SoftBank's expected AI push -- but one that could prove helpful given the value of having close relations with Trump, he said.
SoftBank's stock rose 4.4% in trading Tuesday.
Son has long been a big voice in the tech sector -- and is rarely deterred by lack of cash on-hand. The risk hungry Japanese billionaire was aided by borrowing when he bet the company on the dot-com boom in the late 1990s. He often recalls how he briefly became the world's richest person on paper, only to see SoftBank's share price fall 99% in the aftermath.
He rebuilt -- aided by a rebound in bets on Yahoo's Japan unit and Chinese e-commerce giant Alibaba. He used mountains of debt to buy Vodafone's Japanese unit, and turned it into a winning investment by arranging for the company to be the first to introduce the iPhone to Japan.
Being in Trump's good graces could prove helpful, depending on what form SoftBank's AI-investment takes. Son plans to invest in data centers and energy sources in the U.S., a person familiar with the plans said. And he aspires to get into chip manufacturing, according to people familiar with the matter, an expensive area that can be eligible for significant government assistance.
Creating 100,000 jobs in four years, however, will be a challenge. Tech, and AI in particular, is notoriously unproductive on the job-creation front. SoftBank itself has only 65,000 employees. Its chip unit Arm has only 7,000. Meta -- the $1.6 trillion company founded two decades ago that owns Facebook, Instagram and WhatsApp -- has 72,000 employees. AI data centers can require a few dozen employees.
SoftBank will also need plenty of additional money to follow through on its pledge.
The company had roughly $30 billion in cash as of Sept. 30 and $142 billion in debt, according to S&P Global Market Intelligence. SoftBank has pledged to hold much of that cash as a reserve in case of a downturn, and it has also pledged to avoid taking on substantially more debt.
Son expects some of the money to come from outside investors, the person familiar with the plans said. But his reputation for managing outside money took a hit after SoftBank's $100 billion Vision Fund, launched in 2017, became defined by high-profile flops, such as the failed construction startup Katerra, lender Greensill Capital and Zume, which aspired to make pizza with robots.
When Son tried to raise a second Vision Fund, investors spurned him. The self-funded Vision Fund 2 is down 37% after piling money in at the market's peak.
The first Vision Fund has posted a profit, but its performance still lags far behind the broader stock market and the tech sector.
Its biggest black eye came from office-space startup WeWork, which filed for bankruptcy protection after SoftBank put in more than $16 billion through the Vision Fund and other sources.
Son's involvement in WeWork started eight years ago, when he met WeWork co-founder Adam Neumann for a roughly 15-minute tour of a Manhattan office, after which he agreed to invest over $4 billion in the company.
The reason for the brief encounter: Son was on the way to Trump Tower to meet the president-elect and announce his $50 billion investment commitment.
Write to Eliot Brown at Eliot.Brown@wsj.com
(END) Dow Jones Newswires
December 17, 2024 07:33 ET (12:33 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments