SoftBank Needs a Hit, and It’s Betting on Arm

Masayoshi Son, the chief executive and billionaire founder of the tech conglomerate SoftBank, believed so strongly in Arm, the British chip design company he bought in 2016 for $32 billion, that he guaranteed some big investors they wouldn’t lose money on the deal.

If anything, Mr. Son told those investors, including Saudi Arabia’s Public Investment Fund, he would be willing to pay them as much as double the acquisition price when they eventually exited, according to four people with knowledge of the negotiations, who requested anonymity to discuss a private arrangement.

Mr. Son recently made good on his guarantee, agreeing to buy out his fellow investors at a $64 billion valuation. But as Arm prepares for its initial public offering, one of the biggest in recent years, Mr. Son’s conviction is being put to the test. The company, which designs chips used in cellphones, including all iPhones, is seeking a market value of $51 billion to $54 billion in its I.P.O. — far below where Mr. Son pegged the company’s value.

Mr. Son’s bullish moves reflect his deeply held belief that Arm — which he recently described as the financial and existential centerpiece of SoftBank — is well positioned to take advantage of the revolution in artificial intelligence. At SoftBank’s annual meeting in June, Mr. Son, now 66, said he had a recent revelation: He wanted to spend the remainder of his life and career as “an architect to build the future of humankind” through artificial intelligence. Arm’s chip designing capabilities, he said, would “play a central role” in accelerating the development of A.I. Mr. Son also sees several other big markets for Arm, such as data centers and automotive.

But his monumental bet on Arm also reflects the urgent need for a big win for SoftBank after years of deals that didn’t live up to their promise.

Mr. Son, who started SoftBank in Tokyo in 1981 after graduating from the University of California, Berkeley, built it into one of the largest technology investors in the world. Early investments in the Chinese e-commerce giant Alibaba and in Japan’s mobile phone industry were critical to SoftBank’s success. However, some of SoftBank’s later investments made through its $100 billion Vision Fund, including WeWork, have been far less rewarding.