Masayoshi Son says AWS and Microsoft will buy more chipsets from the SoftBank Vision Fund-backed Arm, and not Intel

• SoftBank reported a loss of $17.7 billion in its investments under the Vision Fund 1, exceeding its own warnings of a $16.6 billion loss.
  
• Out of 88 investments, SoftBank said it had marked down the valuations of 47 of them, pointing at a much wider decline in the industry.
  
• However, Arm has retained its valuation during this bloodbath – Son says that the chipset maker is valued at $25 billion.
  
• An early Arm IPO could end up saving the sinking Vision Fund, but Son had gone on record saying that the IPO would happen in 2023.
  

The fabled SoftBank Vision Fund 1 is sinking. During the fourth quarter earnings call on May 18, the group’s chief executive Masayoshi Son revealed that his flagship tech fund had suffered annual losses for the first time in the last 15 years.

Out of the 88 companies that the SoftBank Vision Fund 1 has invested in, Son assumes that as many as 15 companies could go bankrupt, while 60 others could post average performance. That leaves 13 companies, which Son believes could end up being successful.

British chipmaker Arm Holdings could be one among those 13 companies. In fact, Son considers Arm to be one of the important assets of his fund. And why won’t he – Arm’s shipments have been growing exponentially.

“Going forward, Arm chips are going to be used more and more by Amazon. In fact, not only Amazon's AWS, but Microsoft Azure, VMware, and NVIDIA as well. More and more global companies have adopted Arm based-chip for their cloud servers and that's a global trend. So, the growth of Arm I have confidence,” Son said during the earnings call.

After dominating the smartphone industry, Arm has its sights set on the cloud and data centre sectors, expanding its scope exponentially.

Amazon Web Services, the $4 in public cloud services, has $4 Graviton2 chipset based on Arm’s designs for its cloud infrastructure. According to SoftBank, Graviton2 is believed to be 65% faster than Intel’s Xeon chipsets, and could help save up to 40% of the cost.

An early Arm IPO could save the sinking SoftBank Vision Fund

Arm is $4 looking at an IPO in the next 5 years. However, that may make it difficult for SoftBank, $4 at least $3 billion every year in just equity dividends.

SoftBank reported its first annual loss in 15 years, posting a net loss of $894 million in FY2019. During the same period last year, it posted a net profit of $19.6 billion.

This suggests SoftBank’s troubles go beyond just the COVID-19 crisis – it had to write down its investments in WeWork and Uber, resulting in a loss of $17.7 billion.

To meet its requirements, the company is monetising its assets but that might only work out in the short term. Over the mid and the long-term, listing companies like Arm could be the answer to SoftBank’s troubles.

SoftBank acquired Arm in 2016 for $32 billion. In 2018, it $4 25% of the stake for $8 billion. In its latest earnings, the Japanese group revealed that its stake in Arm is valued at $25 billion, which implies an appreciation of $1 billion in the chipmaker’s value.

With a healthy stake of 75% in his hands, Son has enough opportunity to retain control of Arm while monetising a part of his stake to save his flagship Vision Fund.

Arm shipped 100 billion chipsets in the first 27 years – the next 60 billion came in 3 years

Established in 1991, Arm has shipped more than 160 billion chipsets till date. The first 100 billion shipments took 27 years, while the next 60 billion came in just 3 years.

According to the Q3 2019 earnings $4 by Arm, its shipments rose to 6.4 billion, which it says is a new record.

No wonder Son believes Arm is an important asset for SoftBank Vision Fund.

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