SoftBank Group Corp., a leader in artificial intelligence (AI) investments, has seen its stock price plummet to half of its peak from June. This decline is attributed to mounting debt from extensive AI investments and growing concerns over investment profitability.
On October 22, SoftBank's stock closed at 4,305 yen, down 317 yen (6.86%) from the previous trading day. This marks a nearly 50% drop from its peak on June 2. The stock has fallen over 30% this month alone, making it the worst performer among the Nikkei 225 index constituents, erasing all gains from September.
Just four months ago, buoyed by the AI boom, SoftBank's market capitalization soared to 49 trillion yen (approximately $413 billion), surpassing Toyota Motor Corp. to become Japan's most valuable company. However, as of October 22, its market cap has shrunk to 24.7 trillion yen, effectively halving.
Credit risk is also rising. The premium on SoftBank's credit default swaps (CDS) reached its highest level in nearly four years on October 20. A rising CDS premium indicates that the market perceives an increased risk of default for the company.
Concerns about funding risks related to AI data center investments have intensified following a sharp decline in the bond prices of U.S. AI cloud company CoreWeave. This has led to heightened scrutiny of the financial health of companies involved in AI investments, raising alarms about SoftBank's investment strategy.
SoftBank is investing across the AI ecosystem, including AI infrastructure, energy, and robotics, with a significant portion of its funding sourced through borrowing. In September, the company issued 111 billion yen (approximately $14.68 billion) in corporate bonds to finance its large-scale AI investment plans, marking the largest issuance of speculative-grade bonds in history.
Kazuyuki Muramatsu, head of investment management at Nagomi Capital, told Bloomberg, "As investors scrutinize the financial health of AI-related companies more closely, SoftBank's vulnerabilities are becoming more apparent. This is due to SoftBank Group's high leverage structure and rising borrowing costs."
* This article has been translated by AI.
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