SoftBank Shares Find Footing After Volatile Week Driven by Arm Results

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Investors in Tokyo displayed renewed confidence in SoftBank Group on Friday, halting a slide that had gripped its U.S.-traded shares. The recovery shifts attention to the conglomerate's upcoming quarterly report, with particular scrutiny on the performance of its prized asset, chip designer Arm Holdings.

Following a sell-off that saw SoftBank's American Depositary Receipts (ADRs) drop approximately 7% on Thursday, the stock rebounded in Japan, climbing 2.2%. This upward move helped recoup some of the week's losses and contrasted sharply with the prior day's negative sentiment on Wall Street.

The source of the recent volatility stems from Arm Holdings' latest quarterly figures. While the British semiconductor firm, in which SoftBank holds a 90% stake, reported impressive headline growth, the details gave some investors pause.

Arm's revenue surged 26% to $1.24 billion. A significant portion of this growth came from royalties, which jumped 27% to $737 million, fueled by the accelerating adoption of its advanced Armv9 architecture. However, the segment covering new licensing deals generated $505 million, falling short of analyst forecasts near $520 million.

Market observers zeroed in on a specific transaction within these license revenues. Roughly $200 million originated from a strategic partnership with Arm's parent company, SoftBank Group itself. This substantial internal transaction has raised questions about the organic growth trajectory of the chip design leader, explaining the initial skepticism from Western investors.

All Eyes on SoftBank's February 12 Disclosure

The focus now turns squarely to SoftBank Group, which is scheduled to release its results for the third fiscal quarter on February 12. The report will be dissected for key insights:

• Portfolio Valuation: Market experts will assess the impact of currency fluctuations and shifting technology sector valuations on SoftBank's Net Asset Value (NAV).
• AI Investment Strategy: Will the company officially confirm widespread reports of planned major investments in artificial intelligence leaders like OpenAI?
• Vision Fund Performance: Analysts will examine whether the flagship investment fund managed to secure gains in the current higher interest rate environment.

Friday's broader market sentiment in Japan provided additional support. The Nikkei 225 index advanced 0.8% ahead of a national election, with other technology stocks like Tokyo Electron also gaining ground. This suggests local investors may have viewed the preceding sell-off as an overreaction.

While the day's recovery offers SoftBank a respite, the true test arrives next month. The detailed portfolio insights and management commentary on February 12 will be crucial in determining whether the internal revenue booking at Arm was an isolated incident or indicative of a broader strategic shift.

@ boerse-global.de | JP3436100006 SOFTBANK