SoftBank CFO: "AI-Driven Stock Price Surge Is Not a Bubble"

"While we need to be careful not to be labeled as an artificial intelligence (AI) bubble, there is no need to worry excessively when looking at stocks with rising prices. This is different from the dot-com bubble."

[Image source=Reuters Yonhap News]

As the Tokyo Stock Exchange in Japan surpassed the 40,000 mark for the first time in history, raising concerns reminiscent of the 1990s dot-com bubble trauma, executives from the IT giant SoftBank have offered a diagnosis that the current situation is different from that period.

Yoshimitsu Goto, Chief Financial Officer (CFO) of SoftBank Group, stated in an interview with Nihon Keizai Shimbun released on the 27th, "Unlike during the dot-com bubble, the current stock price increase is driven by a select group of stocks."

Having joined SoftBank in 2000, just before the collapse of the dot-com bubble, CFO Goto, who has a background in finance, said, "The early 2000s were definitely a dot-com bubble. Companies were favored simply because they were IT stocks, and SoftBank was no exception." At that time, SoftBank's market capitalization exceeded a staggering 20 trillion yen but plummeted when the bubble burst.

Yoshimitsu Goto (後藤芳光), Chief Financial Officer (CFO) of SoftBank Group
[Image provided by SoftBank Group]

However, when asked whether he feels the recent situation is overheated from the perspective of someone who experienced the dot-com bubble, CFO Goto drew a clear line, saying, "There is no need to worry greatly." While caution is necessary to avoid mentions of an AI bubble, he diagnosed that, unlike during the dot-com bubble, the price increases are confirmed only in carefully selected stocks.

He pointed out, "Bubbles have a psychological aspect. Back then (in the 1990s), everyone said the Nikkei 225 index was about to break through the 50,000 mark. Looking at the recent situation, the rally is led by foreign investors, and it is not like the entire Japanese market is excited as it was during the bubble economy."

SoftBank, which holds a 90% stake in the British semiconductor design company ARM, has also seen its stock price rally recently, fueled by AI expectations. CFO Goto evaluated, "This is a flow originating from the United States. People’s dreams are tied to AI and semiconductors. There is great anticipation that IT is finally entering a stage where it realizes the world we have long dreamed of." He added, "I believed ARM would become a market-leading company in the mid to long term."

He did not agree with the characterization of the post-bubble stock price stagnation as "trauma." He said, "What is more important is what we learned from the bubble and the subsequent 'lost decade.' For example, during the 2008 Lehman Brothers crisis, Japanese banks suffered almost no damage," evaluating that they have become "stronger and more resilient." He emphasized, "We painfully realized that cash is crucial when facing risks, so we are increasing our cash holdings."

Regarding SoftBank’s management buyout (MBO) option, which was once a hot topic, CFO Goto responded, "We are not considering it now, but it is generally a topic that publicly listed companies always discuss." Concerning the increased borrowing burden due to recent interest rate hikes by the Bank of Japan (BOJ), he dismissed concerns, saying, "Interest rates are supposed to rise originally. There is no need to worry." Additionally, he said, "We always need to pay attention to geopolitical risks," and added, "We will refrain from investing in China for the time being due to growing concerns about economic slowdown."