SoftBank Group overtakes Toyota as Japan’s most valuable company

[TOKYO] SoftBank Group overtook Toyota Motor as Japan’s most valuable company on Monday (Jun 1), marking a milestone for the global artificial intelligence boom and a dramatic reshuffling of the country’s corporate hierarchy.

Shares of the Masayoshi Son-led technology group climbed 14 per cent in Tokyo trading, pushing its market capitalisation past Toyota’s for the first time in more than two decades. The feat was last achieved only briefly during the peak of Japan’s Internet bubble in 2000, based on market value including treasury shares.

The rally has propelled SoftBank shares up more than 90 per cent this year, pushing the company’s market value above 48 trillion yen (S$380 billion), higher than Toyota’s around 46 trillion yen. Toyota shares, by contrast, have fallen more than 10 per cent this year. 

The changing of the guard underscores how rapidly investor tastes have shifted towards companies that are benefiting from the AI build-out. It also reflects how the fortunes of two Japanese corporate titans have diverged, as macroeconomic headwinds and geopolitical tensions weigh on the auto sector while AI euphoria takes hold.

“This epoch-making event symbolises the AI boom,” said Kazuhiro Sasaki, head of research at Phillip Securities Japan. “Extraordinary conditions are emerging around expectations for massive IPOs in the US,” triggering a reshuffle of capital, he said. 

Japan’s memory-chip maker Kioxia Holdings’s market cap is also hovering around 40 trillion yen, making it Japan’s third-most valuable company, surpassing Mitsubishi UFJ Financial Group. The supplier of NAND flash chips expects to earn more in the current quarter than it did in the 12 months ended March due to AI data centres’ voracious appetite for data storage.

SoftBank climbed on Monday as AI-related companies gained across the region, making it the biggest boost to the Topix index, while Toyota was the benchmark’s largest drag. The company over the weekend announced plans to invest as much as US$87 billion to build AI data centres in France, fuelling optimism about increasing demand for AI infrastructure.

SoftBank’s stock has been gaining since news broke last month that two high-profile portfolio companies – OpenAI and SB Energy Corp – were preparing for potential US listings. SoftBank has committed close to US$65 billion to the ChatGPT developer, which will give it a stake of around 13 per cent by October. 

Investor sentiment towards SoftBank has experienced a turnaround, brushing aside earlier concerns that intensifying competition from rivals including Anthropic, Alphabet’s Google and Elon Musk’s xAI Corp might erode OpenAI’s dominance. 

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The company’s valuation has been further supported by gains in chip-design unit Arm Holdings following Nvidia’s earnings results and growing conviction that AI demand will continue spreading across industries. 

Excluding treasury shares, SoftBank’s market cap had already surpassed Toyota’s last month. Unlike in the US, it is customary in Japan for market capitalisation to include treasury shares, although analysts often exclude them for global comparisons.

In contrast, Toyota shares have fallen this year and retreated against a worsening macroeconomic backdrop. Hostilities tied to the Iran conflict have sent oil prices higher, raising fuel costs and dampening demand for automobiles. 

The automotive sector’s growth also remains heavily pressured as the industry navigates a gruelling and capital-intensive structural transition towards electric vehicles amid software integration. 

“SoftBank has concentrated its management resources on AI-related businesses and has successfully ridden the broader global tech rally,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management Japan. “Toyota, meanwhile, has been hit by rising oil prices stemming from the Iran war, which raises the cost of operating vehicles and weighs on global auto demand.”

While Kinoshita said that the valuation gap could reverse later this year if crude prices decline and support automotive demand, the long-term trajectory favours tech. 

 “Over the longer term, AI-related companies are likely to command higher valuations,” said Kinoshita. “Their presence in Japan’s equity market will only continue to grow stronger.” BLOOMBERG