The market value of SoftBank Group Corp has been cut in half compared to its peak level in June. This occurred due to rising borrowing costs, which intensified investor concerns regarding the sustainability of the company's large-scale investments in artificial intelligence.
Shares of the Tokyo-based company fell by 6.9% on Thursday, reducing the decline from its historical high reached on June 2nd to 50%. Even profits from American mega-corporations could not dispel the anxiety. After briefly surpassing Toyota Motor Corp. as Japan's largest company four months ago, its market capitalization is now approximately $24.7 trillion ($157 billion), which is less than that of Hitachi Ltd. and Recruit Holdings Co.
Global concern over AI spending accelerated after bonds from American cloud computing provider CoreWeave Inc. dropped to levels associated with financial distress, revealing financing risks across the entire industry.
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Kazuki Muramatsu, head of investment management at Nagomi Capital, noted that 'SoftBank's vulnerability is highlighted against the backdrop of growing investor scrutiny of the financial health of AI-related companies, given the group's high-risk financial structure and increasing borrowing costs.' He added that if global sentiment regarding the history of AI growth deteriorates, it could lead to a lower valuation of the SoftBank Vision Fund, which in turn would entail a higher premium for future financing.
The price of insuring SoftBank's debt against default rose, and credit default swaps reached their highest level in nearly four years on Tuesday. Since the company relies heavily on debt financing for its investments in the AI ecosystem—including robotics, energy, and infrastructure—CoreWeave's issues undermined confidence even among shareholders who had previously focused on returns from SoftBank's AI stakes.
The stock became the worst performer on the Nikkei this month, losing more than 30% and erasing all gains since September. Furthermore, there is a risk associated with intensifying competition between AI models. OpenAI, in which SoftBank invested nearly $65 billion, now faces more accessible Chinese competitors offering comparable performance.
In September, SoftBank raised $11.1 billion through the largest ever corporate junk bond issuance to fund Masayoshi Son's major ambitions in AI.