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One of the world's most prominent investors has sold all of its shares of the world's most prominent AI stock.
Is that the end of the AI bubble?
Not yet. Because the full story is more complicated: SoftBank Group disclosed Tuesday that it had sold $5.8 billion worth of Nvidia stock — and that it's putting the proceeds into OpenAI, the era-defining company behind ChatGPT.
That is … confusing. And also kind of fitting, since OpenAI and Nvidia have been tightly coupled for the past few years. Because while OpenAI is privately held, Nvidia has been the most exciting stock in the world for several years — going back to late 2022, when OpenAI blew many minds with the debut of ChatGPT.
Prior to that, you might have bought Nvidia stock because you thought its chips would be crucial for the video game industry. But since it turns out Nvidia's chips are crucial for the AI engines OpenAI and its competitors are building, Nvidia has now become the primary stock proxy for the AI boom, with its shares up more than 10x since ChatGPT's launch.
So when SoftBank — a company known for making big crazy bets on the future — dumps its Nvidia holdings, you might think that's a signal about AI. Particularly given the roiling "Is AI a bubble and when will it pop" discourse. Nvidia shares are down nearly 3% on the news.
But SoftBank isn't bailing on AI. Instead, it's selling the world's hottest AI stock so it can buy more AI. SoftBank has already put $7.5 billion into OpenAI, and plans on investing another $22.5 billion into the company soon.
That is: Nvidia is the hardware that makes OpenAI possible. But SoftBank thinks what OpenAI eventually builds will be more valuable than the building blocks. You can see SoftBank making that case in its Q2 earnings presentation, which goes on and on and on about the upside of OpenAI.
There is also some déjà vu happening here. SoftBank founder Masayoshi Son has already made a version of this deal once before: He bought into Nvidia in 2017, sold out two years later for a healthy gain, and then missed Nvidia's crazy rise that started a couple years later. He has been understandably regretful about that one.
But this time he's swapping shares in a public company — one that has to provide close-to-realtime reports on how it's doing — with a private one led by CEO Sam Altman, who bristles if you suggest that his valuation and financial obligations are out of whack with its current reality.
That seems risky, but that also seems on brand for Son, who has made a career out of making big swings. He was early and right about the internet in the 1990s and on Alibaba in the 2000s. He was also terribly wrong about WeWork.
We don't know how this one is going to pan out. Still, SoftBank's latest move tells you what kind of market we're still in: one where the biggest players are willing to sell the sure thing to chase the next thing.
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