SoftBank market value halves from peak on AI debt fears

SoftBank Group has lost half its market value since June. Rising borrowing costs and stress in AI-related credit markets have made investors question whether its debt-funded bets on artificial intelligence can last. The shares fell 6.9% on Thursday, October 22, which put them 50% below the record high set on June 2, Bloomberg reported. SoftBank is now worth about ¥24.7 trillion ($157 billion). Four months ago it briefly passed Toyota as Japan's most valuable company. Today it is smaller than Hitachi and Recruit Holdings.japantimes.co.jp

The stock closed down 317 yen on Thursday, according to Aju Press. That outlet put SoftBank's peak market value at about 49 trillion yen. The stock has dropped more than 30% in October, making it the worst performer on the Nikkei 225 this month and wiping out its September gains.bloomberg.com+1

CoreWeave's troubles spread

The selloff picked up speed after bonds issued by U.S. cloud provider CoreWeave ↘ 2.46% fell to distressed levels. On October 14, its unsecured notes due 2032 traded below 80 cents on the dollar. Reuters Thomson Reuters Corporation ↘ 0.07% reported that CoreWeave carries about $50 billion of debt, and some of its bonds were yielding roughly 15% to 16%. That happened even though Nvidia ↘ 0.59% has agreed to buy any unsold CoreWeave capacity through 2032.reuters.com+2

The worry has reached SoftBank's own credit. On Tuesday, October 20, the cost of insuring its debt against default through credit-default swaps hit its highest level in nearly four years. Strong earnings from large U.S. tech companies did little to calm investors.japantimes.co.jp

A leveraged bet on AI

SoftBank borrows heavily to fund AI investments that range from infrastructure and energy to robotics. It has put almost $65 billion into OpenAI, which now faces cheaper Chinese rivals with comparable performance. In September, SoftBank raised $11.1 billion through the largest corporate junk bond sale on record to pay for founder Masayoshi Son's AI plans.japantimes.co.jp

"SoftBank's vulnerability stands out as investors increasingly scrutinize the financial health of AI-related companies, given the group's highly leveraged financial structure and growing borrowing costs," said Kazuyuki Muramatsu, head of investment management at Nagomi Capital. He warned that if investors turn against the AI growth story, SoftBank's Vision Fund could post valuation losses, which would make future funding more expensive.japantimes.co.jp