In 24 years, SoftBank stock reaches its first record high, thanks to Arm and AI technology.

• On Thursday, SoftBank shares reached a new record high of 11,190.00 Japanese yen, surpassing the previous intraday high of 11,000 yen set on Feb. 15, 2000.
• The success of British chip designer Arm in the public market has given a boost to the Japanese giant, which holds a majority stake in the company.
• The Vision Fund, a significant tech investment arm of SoftBank, has reported improved financial outcomes during a broader tech stock market recovery.

On Thursday, the shares of the Japanese giant hit a record high, coinciding with the recovery of its massive tech investment arm and the return of its outspoken founder Masayoshi Son to the public eye, as he aligned the company towards a future in artificial intelligence.

The success of British chip designer in the public market has also benefited the firm, as Softbank holds a majority stake in it.

On Thursday, the Japanese giant's shares reached a new record high of 11,190.00 Japanese yen, despite the dotcom crash of the early 2000s and the recent downturn during the tech market troubles of 2021 and 2022.

SoftBank's journey to the peak

In 1981, Son established SoftBank as a software distributor. The company went public in Japan in 1994 and made a $2 million investment in Yahoo during the internet boom in the middle of that decade.

That started off the company's tech investments.

On Feb. 18, 2000, SoftBank's stock reached a peak closing price of 10,111.1 yen due to the rise of the internet and Yahoo. Three days earlier, the company's shares had hit an intraday high of 11,000 yen.

The decline of internet stocks caused SoftBank's share price to fall more than 90% below its dotcom peak.

Nearly 21 years after its previous record-high close, SoftBank surpassed it again on Feb. 16, 2021.

Vision Fund

Since the launch of the Vision Fund in 2017, SoftBank's share price has been volatile, with Son positioning the company as a visionary pioneer in technology investment.

SoftBank invested in numerous tech companies globally, some of which failed. WeWork is one of the well-known companies that SoftBank invested in. Additionally, SoftBank's investments in Chinese firms also suffered after Beijing launched a crackdown on the domestic tech industry at the end of 2020.

SoftBank's stock fell sharply in March 2021, alongside other global tech stocks. The Vision Fund posted record financial losses in 2022. Son said that SoftBank would go into "defense" mode and be more conservative with its investments. He changed tack shortly after the Vision Fund posted a record $32 billion loss in 2023, saying that the company would now shift into "offense," because he was excited about the investment opportunities in AI.

The Japanese titan's Vision Fund recently posted better financials, and SoftBank's share price began recovering from around May 2023.

The write-down cycle for Softbank Vision Fund's investments is mostly over, and there is a good chance that the IPO market will be more favorable for AI-related investments, according to Oliver Matthew, head of Asian consumer research at CLSA.

Arm chip boost

The recent 78% increase in SoftBank's share price can be attributed to the successful IPO of Arm, which it acquired in 2016.

Despite being listed, SoftBank retains approximately 90% ownership of Arm. The company's shares have experienced a remarkable increase of nearly 124% this year, as of the July 3 close.

"Before the recent AI-related names bull cycle, SoftBank Group had already been investing in developing an AI ecosystem portfolio," Paul Golding, senior U.S. lifestyle and payments analyst at Macquarie U.S. equity research, stated in an email to CNBC.

"In our opinion, this vision likely influenced some of the investment decisions in 2016 to acquire Arm, allowing SoftBank Group to gain direct exposure to semiconductor market dynamics and own intellectual property around semiconductor design before broader advancements in AI use-cases and platforms."

SoftBank has been benefiting from the well-publicized uses of Arm intellectual property, such as in the automotive industry or cloud data center, according to Golding.

Do investors believe the SoftBank story?

Over time, there has been debate among investors about whether SoftBank Group's valuation accurately reflects the value of its investments.

SoftBank's stake in Arm is worth around $158 billion, which is significantly above the company's overall valuation, without considering its other holdings and businesses.

SoftBank's share price does not reflect its fair value, according to analysts.

According to Dan Baker, senior equity analyst at Morningstar, much of SoftBank's price increase is due to Arm.

According to Baker, who spoke to CNBC via email, investors may not be fully convinced by the SoftBank story again. Baker believes that this year's share gain is mainly due to the rise in Arm stock and the weakening of the Japanese yen. Baker suggests looking at the sum-of-the-parts (SOTP) valuation, which assigns value to the different parts of SoftBank's holdings to determine the company's true worth. The SOTP valuation remains just under 50% this year, indicating that SoftBank's stock does not accurately reflect the value of its various businesses and investments.

Baker stated that while he is uncertain about investors believing the SoftBank narrative, they are definitely purchasing the ARM story.

The sale of SoftBank's shares in Alibaba, the Chinese e-commerce giant that Son backed in 2000, has been met with approval from investors.

The recent increase in Japanese stocks, with the Index up 22% this year alone as of Thursday, may have also contributed to SoftBank's growth.

Artificial super intelligence

Can Son's focus on AI enhance SoftBank's value and end the discount on its portfolio of assets?

SoftBank founder, who has been out of the public eye for a year, recently expressed his enthusiasm about the future of AI and how SoftBank can play a pivotal role in this technology through its investment in companies such as Arm.

Last month, he unveiled his plan for a future with artificial super intelligence, or ASI, which would be 10,000 times more intelligent than humans.

The excitement around AI technology is driving investors to seek ways to capitalize on the boom, as evidenced by the rapid increase in stock prices.

Matthew from CLSA stated that SoftBank's discount may decrease in the future due to some of the company's early AI investments.

Matthew stated that Softbank has consistently followed its investment strategy, being one of the first investors in the AI theme. Despite this, some investors believed they were overpaying or investing in companies where the relationship between AI and the company was unclear.

"The fair value of Softbank Group shares is being traded at a surprisingly wide discount, which we believe will narrow in the future."