Is This Good News for NVDA Stock?
SoftBank Group Corp. is a powerhouse in Asia, yet it is unknown to many Americans. That might explain why investors ignored SoftBank’s $4.0 billion investment in NVIDIA Corporation (NASDAQ:NVDA). They simply don’t realize what it means for NVDA stock.
So let me try and put it in perspective.
SoftBank is a telecom giant turned investment house.
Think of it as a tech-focused version of Berkshire Hathaway Inc. (NYSE:BRK.B). And think of its CEO, Masayoshi Son, as a Japanese version of Warren Buffett.
Like the Oracle of Omaha, Mr. Son has an innate talent for making money. He’s made billions and billions of dollars. Now he’s spending it on various tech companies.
Here’s a list of SoftBank’s major investments in the last few years:
|(I)nvest/(A)cquire||Name||Type of Business||Price|
|I (2017)||NVIDIA Corporation||Microchips||$4.0B|
|I (2017)||Didi Chuxing||Ride-sharing||$5.0B|
|A (2017)||Fortress Investment Group||Private Equity||$3.3B|
|A (2016)||ARM Holdings plc||Microchips||$31.0B|
|I (2013)||Sprint Corp||Telecom||$21.6B|
By adding NVIDIA stock to his portfolio, Mr. Son was giving it an enormous seal of approval. If Buffett did that, the share price would have jumped immediately afterwards.
But Mr. Son and SoftBank are unknown quantities in the U.S., so they don’t get the same level of respect. Don’t let that fool you.
The bottom line is that one of the savviest investors on the planet just bought NVDA stock.
How NVDA Stock Fits into SoftBank’s Big Picture
While it may seem like SoftBank is throwing money around willy-nilly, there is a visible pattern. Each of these investments lines up with an emerging technology.
For instance, Didi Chuxing is at the forefront of ride-sharing and self-driving technology. It completely dominates the Chinese market—which is bigger than the U.S. market, by the way—and it chased Uber Technologies, Inc. out of the country.
Uber threw money at the problem, tried partnering with a Chinese firm, and even offered substantial discounts…but nothing put a dent in Didi Chuxing’s market share, so Uber was forced to throw in the towel.
Now Didi Chuxing has a de facto monopoly over the Chinese ride-share market, which means it can turn its attention to other ideas like driverless cars, perhaps.
Softbank jumped at this opportunity to bet on driverless technology. It poured $5.0 billion into Didi this year.
If history is any judge, this investment could pay enormous dividends, much like SoftBank’s earlier investments into Yahoo! Japan and Alibaba Group Holding Ltd (NYSE:BABA). But what does any of this have to do with NVIDIA?
Simple: NVIDIA makes graphics cards, and these graphics cards are essential to driverless technology—they are the brain of the car.
Without them, no autonomous car could possibly exist, because they wouldn’t be able to parse the images flowing in. I’ve been saying for months and months that this technology is key to NVDA stock. It completely lifts the valuation.
Clearly, Masayoshi Son agrees with me; by investing $4.0 billion into NVIDIA stock, he is essentially doubling his bet on driverless technology.
This would suggest that my favorite microchip stock is far from done. It served me well by tripling in value last year. Now a repeat performance is in order.
Chart courtesy of StockCharts.com