Softbank Sells Nvidia Stake for $5.8 Billion to Fund AI Bets

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1:50Bloomberg Audio Studios. Podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. A lot of news flow today on the tech front and NVIDIA. I mean, when Masa-san sells stock in a company, that's news to me. That is news. But I mean, does he have great timing or does he have poor timing? That's my question. Ah, yeah. I don't know. I mean, I don't know. He sold it for$5.8 billion. What are you going to do with that?

2:29Ed Ludlow, he does all this tech stuff out there in San Francisco. He is the B-Tech co-anchor alongside Caroline Hyde. So, Ed, you know, whenever Masahiro-san does anything, it really gets people's attention here. What do you make of this trade? Your heads are in the right place. I mean, they're selling out of the entire stake, and that's worth reiterating. It's all of it in one go. $5.6 billion, which for a$5 trillion company, almost$5 trillion company, is not that much. But it's also not unprecedented. And what Scarlett was saying about timing, SoftBank sold out of NVIDIA once before. That was in 2019, right before the kind of chat GPT explosion in AI data center demand.

3:12But then they kind of realized 2020, they needed to get back in and they slowly built up a stake, which resulted in on paper gains that were really significant. So the market seeing this, even though Nvidia is down, I think it's down two and a half percent, right, guys? Not necessarily is an issue with Nvidia or a signal that SoftBank has concerned about Nvidia. They're seeing it or taking SoftBank at its word that this is just financing for the other things they want to do. Okay. And in terms of the other things it wants to do, it's got a lot of different AI projects going on, isn't it? Yeah, across both public and private initiatives, right?

3:50There are some AI startups in the compute space that they're looking at taking private, for example. They still want to deploy capital out of the Vision Funds and Vision Fund 2. And, you know, they didn't tell us much, the CFO in particular, on the call. But that's it, you know, realizing gains, using the realized gains to generate cash and using that cash for investing. That's what they do, right, I think. Yep, exactly right. Do you think that Masa believes that he and the fund have a proper allocation to AI at the moment? This is the really important question because there is a lot of exposure with SoftBank to open AI, both in terms of direct investment, but also co-financing and partnering on the Stargate data center project.

4:43Some people have concern about the concentration risk. You know, right now, OpenAI is seen as the world's leading frontier model lab or AI lab, but that's not guaranteed, of course. And so they would ask, well, is it diversified enough? But yeah, it's a really critical question. Remember, like through ARM and the board representation that they have with ARM, there is an idea that if ARM designs data centerships, SoftBank benefits from that, what they're doing with Ampere in the compute space as well. That's why they need this$5.6 billion, they say. Okay. So that's one of the big stories on the top worldwide page on the Bloomberg terminal.

5:22The other one is CoreWeave's results. And we talked a little bit about NVIDIA earlier, NVIDIA actually owns about a 6.5 % stake in CoreWeave, one of those neocloud companies. What was the takeaway from the latest earnings report? Yeah, so they cut their full-year revenue guidance for fiscal 25 to a range of$5.05 billion to$5.15 billion. The previous high end of the range had been$5.35 billion. So they've lowered it by about$200 million. And they say that that That is because a third party that was building data center capacity for them let them down. They're behind schedule. And because that data center won't be up and running, they can't realize the revenue for a specific customer, which they're not naming.

6:10Does that justify the stock being down 11 %? That's not a question for us. That's a question for the sales side and for the investors themselves. But there's a lot of commotion about what is a$200 million trim because some capacity is delayed. And the thing you need to know, Scarlett, is like, generally speaking, CallWeave cannot get data center capacity up and running quick enough to meet the demand that it has. Stay with us. More from Bloomberg Intelligence coming up after this. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute.

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8:33You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. I think my new favorite stock symbol is P-Sky. Yeah, that's a good one. I like that one. It's for Paramount Skydance. The company reported earnings yesterday, kind of in line numbers, but a lot of cost cutting going over there. And the stock's up 10 % on the news today. So let's check it out with Geetha Ranganathan because she covers all the media stuff for Bloomberg Intelligence.

9:08And Geetha, I'll ask you the one earnings question, but then I want to get to the meat of the matter here. How were the earnings for this newly combined company and what's the outlook? Yeah, Paul, earnings were a little bit messy. They were mixed. But the good news was that the company kind of over delivered when it came to streaming profitability, which is the big thing that everybody's looking for, given that, you know, they've just lost tons and tons of money on their streaming business. So that was good news. I think why Wall Street is really cheering Paramount Skydance today is because the guidance that they provided for 2026 was pretty promising.

9:45So a street was in at about three point one billion for EBITDA for next year. They came in with three point five billion. And a lot of that, as you just pointed out, was because of the cost savings. So they've taken it up from two billion to three billion. Very, very aggressive measures across the board. But I think overall, it was, you know, what really kind of came across was that this is a solid management team that really knows what they're doing. They're super focused, you know, on driving that transformation within the company. And I think that really kind of cheered investors. Speaking of driving transformation in the company, the big question for Paramount Skydance is whether it's going to buy Warner Brothers Discovery wholesale or at least parts of it.

10:29Did we hear anything from the executives in the earnings call? Yes, Scarlett, that's a great question. I mean, obviously, that was the first thing on everybody's minds. So, you know, obviously, no specific commentary on Warner Brothers itself. But the one thing that they did say was that they think, you know, they don't, there's no must have for them. So they really kind of downplayed the whole need for M &A. They said that, you know, they have all of the, you know, they have a great portfolio of assets. Of course, we all know that these assets have been under managed for many, many years under invested.

11:00So there's a lot of work to do there. There's a lot of restructuring that needs to happen. But they really kind of downplayed Warner Brothers. Of course, we know that, yes, they are making huge content investments. They are making huge technological investments. But if you look at their streaming service, which is Paramount Plus, it has roughly 80 million subscribers. OK, they do have, you know, all of these new content investments. Let's say the UFC, Zufa Boxing, all of that, South Park, not enough to move the needle. And I think they know that the street knows that, which is why they do need something transformative like Warner Brothers Discovery, which will really kind of put them on the map when it comes to streaming for sure.

11:39And also in terms of extracting more synergies on the linear TV side of the business where they have huge exposure. Over 55 percent of revenue still comes from linear TV. So when you look at the enterprise value of Warner Brothers Discovery, it's almost three times the enterprise value of Paramount Skydance, suggesting that if Paramount Skydance wants to do a deal here, they're going to need a ton of equity, whether it comes from Mr. Ellison or whether it comes from private equity or some combination. Is that kind of where people are thinking about it? That is kind of where people are thinking about it.

12:12And, you know, what was really interesting, Paul, was, you know, they've made three bids for Warner Brothers Discovery thus far, all of which have been rejected. The last one was for almost$24 a share, which was basically 60 billion equity value, about 90 billion enterprise value. And the thing there was they were offering 80 percent cash. I mean, they first started out with 60 percent. They sweetened it to 80 percent. But David Zaslav, as we know, is really a tough negotiator and basically said no. So we think he's looking for something north of 30. I'm not sure Paramount Skydance is going to be willing to cough up that much, but let's see.

12:48Yeah, that's a that's a big, big question mark. Geetha, as you look at the media landscape, we're focused so much on Warner Brothers Discovery and what happens to its assets, what's happening to its businesses. What are we missing when we look at what else might be up for sale or might become, you know, not up for sale, but something that a buyer might be interested in pursuing? Yeah, I mean, when we look across the landscape, you're absolutely right, Scarlett. And the reason why there's so much of attention on Warner Brothers Discovery is because it's really kind of the last big, you know, iconic studio.

13:22If you're looking at it, a huge streaming property with HBO, you know, huge names in the business, just iconic franchises. big brands, big brands, core franchises, things that can really move the needle for any company, for any buyer. We don't really have anything quite like Warner Brothers. Yes, we have a lot of smaller names. You can think of an AMC Networks. You can think of a Lionsgate Studio. You can think of Comcast's new spinoff cable TV networks, which is called Versant, but none of them as attractive as Warner Brothers. So there are a lot of opportunities for consolidation. You have a lot on the broadcast TV station side, whether you're thinking of a Gray or a Sinclair.

13:59But again, nothing quite as attractive or as massive as Warner Brothers Discovery. Timing. When do you think something might happen with Warner Brothers Discovery? It has to happen quickly, Paul, because if Warner Brothers Discovery doesn't decide to go ahead with a sale, they do have a split of the company, which is splitting the company into the TV E-Networks division and the streaming and studios division, that is supposed to happen sometime mid-2026. So I'm assuming, you know, things have to move pretty quickly in the next couple of months. Stay with us. More from Bloomberg Intelligence coming up after this.

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15:41You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. One subject that I can't get enough of is premium credit cards and the rewards that you rack up if you use them only in certain times at grocery stores versus restaurants versus to pay for your plane ticket. Well, there's been a settlement between Visa, MasterCard, and merchants that may change the way that we use our premium credit cards. And Justin Teresi is here with us.

16:18He is a BI litigation analyst here at Bloomberg Intelligence. Justin, what happened and what does this mean for my Chase Sapphire card or my Amex Platinum card? Yeah, really big news here. So first of all, this case has been going on for about 20 years now. It started before I went to law school, which was a long time ago. There's salt and pepper in my hair. So we're talking about a really, really ancient case. But basically, what a lot of folks don't know is when you have those really valuable premium cards, right, the airline miles cards or the cashback cards, there's a fee associated with those.

16:48And it's the merchants who are eating that fee, typically around three or four percent, depending on the varying swipe fee when you use it at a register. So merchants, no surprise, they're upset about that. So Visa, big litigation here, the accusation being that they fixed those fees and that the merchants are basically the ones eating the cost there. So big deal announced yesterday between Visa, MasterCard and merchants would make a little bit more flexibility on the part of merchants here. They could basically say, hey, we're going to take the lower tier version of a Visa and MasterCard, but we're maybe not going to accept airline miles cards or cashback cards.

17:23And then alternatively, they also might have the option of passing those fees onto you, the consumer, at the register if they do take them. So some big changes here in how things are shaping up. Well, I've noticed in the last couple of three years, they are doing that. Yeah. I mean, almost every merchant I go to now, I don't know if it's just a state of New Jersey thing, but they're saying, hey, here's the cash price. Here's the credit card price. Yeah. Paul, this is actually a really interesting issue here because state by state, there's a lot of differences in how this actually plays out in New York.

17:50And I see this too. when I go to my dry cleaner, it's like, oh, maybe that's 4 % more if I'm going to use my credit card here. That's actually illegal in New York right now to do that. But the enforcement seems to be lacking that this is a new law passed in 2024. There has to be an upfront kind of price on a tag if they're going to pass a surcharge onto a consumer in New York, Massachusetts, Connecticut, you can't surcharge at all. So if this settlement goes through, you know, that's a big question mark too. Interesting that you say that that surcharge is illegal in New York, because what I've seen is the dry cleaner will say, we'll give you a discount if you pay in cash.

18:23Here's the regular price, but you get the discount if you pay in cash. So it's no longer a surcharge. Justin, you said that this has been a case that's been around for 20 some odd years. So this settlement that was announced yesterday, I mean, is it just going to get caught up in more legal tideswire? You know, it really could. So last year there was a first attempt to this. This is the second try now, right? And the big issue that blew up the deal last year is that the smaller merchants kind of pushed for the terms that they set in the first place and big folks like Walmart, etc. kind of got iced out from the discussions on that.

18:53It seems like that might have happened again here. The National Retail Federation was out yesterday saying, wait a minute, what kind of business practice would this be for us to say, hey, we're going to take these cards and not those cards. And they're also criticizing the fee concessions that were part of this deal too for the next five years or so. So I think there's still a lot of questions here. There's probably enough changes from last year's deal to get it over the finish line. But there's a big period here with objectors who are going to be weighing in on what they think of the deal. And honestly, the judge last year, she said, look, you guys can do a lot more than you're offering to do in this deal.

19:26So is this enough? That's going to be a huge question moving into an approval hearing. What are the dollars, dollar amounts we're talking about? Yeah. You know, so it's quadrupled, according to the National Retail Federation since 2009. But Visa and MasterCard, They've got 80 % of this market for the card fees, right? $111 billion last year alone collected in these swipe fees, according to the NRF. So really, massive, massive. But these companies are also diversifying their streams, right? They're looking into digital wallets and other payment platforms, too. So there's a lot more on the table now than there was when this was first brought back in 2005.

20:02And to be clear, this is Visa and MasterCard and merchants. What about American Express? Where does it sit here? Yeah, so that's another great question. American Express basically settled a version of this lawsuit or won a version of this lawsuit years ago. Their card acceptance terms are a little bit different. Surcharging doesn't really allow with those when it's not applied to all card types, right? But that begs the question. If you start allowing surcharging through cardholder, through acceptance agreements for Visa and MasterCard, does Amex now have to allow surcharging on its card? So that's another big question mark if this deal goes through.

20:34It really has the potential to impact everything, not just Visa and MasterCard. Paul, I remember when Amex used to be accepted everywhere. And then after a while, it was like, oh, we'll take Visa and MasterCard, but not American Express. Yes. Because it was always, for the merchants, too expensive. Too expensive. Okay. Yeah, I can't remember the last time I used my Amex card. Literally, I can't remember. It's there in your pocket, though. It's in my pocket. Okay, see, that's the thing. I mean, what does this mean for companies that have corporate cards, Justin? Yeah, so that's one of the different brackets here, too.

21:03So the way the settlement works is that it's going to divide cards into three different types. So the commercial cards, standard customer cards, and then premium customer cards. I think the commercial and standard cards, you know, you want that corporate business. I think those two really are of the less concern. It's those premium cards, I think, with the rewards that really are on the line here in terms of whether or not they continue to have that universal acceptance everywhere. so there's so many businesses built around how to gamify your points oh yeah yeah i love it so you do that i i absolutely love it i mean every day it's like oh these anex offers you know what can i get here for this discount do you keep a spreadsheet tracking your spending but i really should honestly i mean it's that good i think so paul's like i cannot get into this no but the kids are because i mean i've noticed that that um they really are good at gaming the system.

21:52And to the point where, you know, I'm going to Barcelona for the weekend on points, you know. Right. Exactly. And these premium credit cards are almost like coupon books in many ways, right? Because they offer, you know, like$50 a quarter at, well, actually it's$75 a quarter at Lululemon, for instance, or the Amex Platinum card. And then people try to buy a gift card and stack them and use them like a year later. I was laughing at me. Absolutely true. And they carry those really high annual fees. But then again, I always think to myself, look how much I'm getting back for this. It outweighs the fee sometimes, at least in my mind.

22:22So there you go. What are Visa and MasterCard saying about this? So they signed onto this deal. They reached this agreement. I think they're pretty happy with the terms of it because, you know, that kind of lets them walk away. The issuing banks like JP Morgan, Bank of America, all of them are also defendants. They get to walk away from this litigation. The overhang would be removed, right? So it's really the merchants. Are all of the merchants going to sign on? And what are those objections look like in the next coming coming months to the court? Stay with us. More from Bloomberg Intelligence coming up after this.

22:55This is Tom Keene inviting you to join us for the Bloomberg Surveillance Podcast. It's about making you smarter every business day. I'm Paul Sweeney. We bring you complete coverage of the U.S. market open. We cover stocks, bonds, commodities, even crypto, all the information you need to excel. And I'm Alexis Christophorus. Bloomberg Surveillance also brings you the analysis behind the headlines. We do that through conversations with the smartest names in economics, finance, investment and international relations. We do all this live each and every weekday that bring you the best analysis in our daily podcast.