9984: Expanding AI Infrastructure Investments Will Drive Shares Higher

Narrative Update on SoftBank Group

Analysts have raised their price target for SoftBank Group from ¥20,000 to approximately ¥28,062. This reflects updated expectations for slightly stronger revenue growth, a higher long term valuation multiple, and a modestly higher discount rate despite lower projected profit margins.

What's in the News

• SoftBank plans to invest up to $3B to remodel an EV plant in Lordstown, Ohio, in order to supply equipment for OpenAI's new U.S. data centers, deepening its role in AI infrastructure (The Information).
• The U.S. Federal Trade Commission granted early termination of its review of SoftBank's $6.5B acquisition of Ampere Computing, clearing a key regulatory hurdle for the deal (Bloomberg).
• SoftBank's board approved a second installment of $22.5B to complete its $30B investment in OpenAI, which is contingent on the startup completing a corporate restructuring ahead of a potential IPO (Reuters).
• SoftBank has been exploring a potential takeover of semiconductor firm Marvell, including the possibility of combining it with Arm as part of its push into AI focused hardware, although talks stalled over terms (Bloomberg).
• SoftBank is seeking a $5B margin loan backed by Arm shares to fund additional OpenAI related investments, which would lift its total margin loans secured by Arm stock to about $18.5B (Bloomberg).

Valuation Changes

• The fair value estimate has risen significantly from ¥20,000 to approximately ¥28,062 per share, implying a higher long-term intrinsic valuation.
• The discount rate has increased slightly from 4.76 percent to 4.80 percent, reflecting a modestly higher required return on equity.
• Revenue growth has risen slightly from about 8.03 percent to 8.10 percent, indicating a marginally stronger top-line outlook.
• The net profit margin has fallen meaningfully from roughly 11.35 percent to 9.31 percent, pointing to lower expected profitability.
• The future P/E multiple has increased substantially from about 29.6x to 50.3x, signaling a materially higher valuation relative to projected earnings.