— This is the script of CNBC's news report for China's CCTV on September 7, 2020, Monday.
In the past few months, we've seen a lot of milestones because of the crazy rally in U.S. tech stocks. Apple's market capitalization topped $2 trillion; Bezos, founder of Amazon, is worth more than $200 billion. Tesla founder Elon Musk beat Warren Buffett in the rich list. These dizzying gains and last week's unexpected plunge have given traders a sense of a hidden force moving the market. The Financial Times and The Wall Street Journal, citing people familiar with the matter, reported that the force could come from Japan's SoftBank Corp. The Financial Times calls SoftBank the "NASDAQ Whale", describing its recent investment operations brought huge impacts to the technology sector and the U.S. stock market.
According to the Wall Street Journal, regulatory filings show that SoftBank bought about $4 billion worth of shares in major technology companies this spring, major in Amazon, Microsoft, Netflix and Tesla. But it has not been publicly disclosed that they also bought calls on individual stocks of that size in a series of trades over the past few months. That gives SoftBank about $50bn of exposure. Those moves have fueled a rally in tech stocks, and their sheer size may have influenced broader market moves. Those investments may have been a boon for SoftBank, given the rise in tech stocks over the past few months, but they also have significant risks.
Peter Boockvar, chief investment officer at Bleakley Consulting Group, described Masayoshi Son's recent aggressive move as gambling. That means it is not just retail investors that has been driving the boom in the past few months, but institutional investors too.
Elevation Partners co-founder
one of the things that whenever you get the kind of momentum driven market we had here very small changes in the emotional state of investors can produce huge changes and if it is true and let's just assume that that it is true that Softbank was you know was playing these games in the market somebody is going to get hurt from that, at is if it's true that Softbank was doing that that would be one more sign that the fundamental picture here is decoupled from stock prices
Data from Goldman Sachs, an investment bank, show that in the past two weeks before the crash, the notional value of calls on individual stocks traded in the US had hit a record high, averaging $335bn a day, three times the average from 2017 to 2019.
The plunge in the last two trading days of the week has put valuation risks in technology stocks further into focus, with major stocks such as Apple and Tesla warned.
Elevation Partners co-founder
I just didn't want to take a huge amount of risk and what I perceived going on in the market was that we were having a speculative blow-off. I look at what's going on you know in terms of fundamentals i mean I look at those economic reports and what I see is a situation that is precarious we do not have control of the covet pandemic and we have really harmed our relationship with china
Son lost $70bn of his personal wealth in 2000 when the dotcom bubble burst. After vision's huge losses earlier this year dragged down SoftBank's share price, he quickly shifted gears to try to turn things around. SoftBank has not commented on the public report regarding "NASDAQ Whale", Whether this big gamble is right or wrong also requires further observation. We will keep an eye on this issue.