By Anton Bridge
TOKYO, Nov 10 (Reuters) - Japan's SoftBank Group said on Tuesday it had swung to a second-quarter net loss of $7 billion, hit hard by hefty buildout costs for data centres in the US and increases in financing payments.
The result will likely intensify questions about how well the tech investment giant can weather setbacks currently buffeting the AI sector, given founder Masayoshi Son's big bets on data centres and the company's $64.6 billion purchase of a 13% stake in ChatGPT maker
OpenAI.
SoftBank said it recorded a $3.7 billion loss due to a subsidiary's advance payments for power generation equipment to be used in AI data centre projects in the US including Pike County, Ohio. Those plans were later revised. It is, however, entitled to rebates of up to $2.1 billion on future purchases.
Its financing costs also more than doubled to 462 billion yen ($2.9 billion) in the quarter.
The 1.1 trillion yen net loss for the July-September quarter compares with a 2.5 trillion yen profit in the same period a year earlier when it logged a huge investment gain on an increase in the value of its stake in OpenAI.
SoftBank's earnings are volatile and difficult to predict. Forecasts from three analysts polled by LSEG had ranged from a profit of 233 billion yen to a loss of 113 billion yen.
AI SECTOR SETBACKS
The Democratic Party's sweeping success in US midterm elections last week heightened expectations of regulatory scrutiny, amplifying concerns that had been growing among investors about returns for the AI industry.
Though SoftBank's shares surged 14% on Tuesday ahead of the results, they have, like other AI stocks, been battered by the cooling investor sentiment, almost halving in value since the start of June.
The sector was further rocked this week by the news that the FBI is looking at Jensen Huang, Nvidia's CEO and the face of the AI boom, after his affair with a Chinese businesswoman alleged to be a spy for Beijing. SoftBank was a major investor in the AI chipmaker in the past but no longer holds a stake.
SoftBank's heavy borrowing at sometimes eye-popping yields has been a concern for some investors.
During the quarter, SoftBank's borrowing included an $11.87 billion term loan, a $10 billion dollar-denominated corporate bond and a 1 trillion yen-denominated corporate bond.
SoftBank also increased the margin loan on its stake in chipmaker Arm by $5 billion to roughly $25 billion.
While SoftBank's stake in TikTok maker ByteDance generated an investment gain of $1.3 billion during the quarter, share prices of major public portfolio companies such as Coupang and Grab declined.
($1 = 157.9700 yen)
(Reporting by Anton Bridge; Editing by Sam Nussey, Miyoung Kim and Edwina Gibbs)
