SoftBank Shares Halve From June Peak as AI Spending Model Faces Scrutiny

SoftBank Group shares fell as much as 6.7% on October 22, bringing their cumulative decline to 50% from the all-time high set on June 2. Rising financing costs and debt troubles at U.S. cloud services provider CoreWeave have intensified investor concerns over SoftBank's financial health amid its heavy spending on artificial intelligence.

Kazuyuki Muramatsu, investment management director at Nagomi Capital, said investors are increasingly focused on the financial health of AI-focused companies. SoftBank's heavy reliance on borrowed funds, combined with rising financing costs, makes its financial risk particularly prominent. If global sentiment toward AI growth turns pessimistic, assets of SoftBank's Vision Fund could depreciate, potentially raising the group's future financing risk premium.

SoftBank's credit risk has also risen. On October 20, the cost of credit default swaps used to hedge against SoftBank's debt default risk climbed to a nearly four-year high. The company's AI investments span infrastructure, energy and robotics, largely funded through debt. CoreWeave's debt problems have not only worried bond investors but also shaken equity investors who had previously valued SoftBank's AI investment returns. The stock has fallen more than 30% this month, erasing all of September's gains.

Intensifying competition in the AI model market is also pressuring SoftBank. The company has invested nearly $65 billion in OpenAI, which faces growing competition from Chinese rivals offering models of comparable performance at lower prices. In September, SoftBank issued $11.1 billion in junk bonds, setting a record for corporate high-yield bond issuance, to support founder Masayoshi Son's ambitious AI investment plans.