SoftBank Loses Half Its Market Value in Four Months as AI Debt Fears Mount

Masayoshi Son, chairman and CEO of SoftBank Group. SoftBank Group’s market capitalization has fallen to roughly half its record high reached on June 2, as concerns over excessive artificial intelligence (AI) spending and mounting debt weigh heavily on the Japanese investment conglomerate’s shares. SoftBank shares closed at 4,305 yen, or approximately $27.52, on the Tokyo Stock Exchange on Oct. 22, down 6.86% from the previous session. The stock has lost more than 30% this month alone, erasing all its September gains and making it the worst-performing constituent of the Nikkei 225. Its market capitalization has shrunk to approximately 24.7 trillion yen, falling below those of Toyota Motor, which it had briefly overtaken, as well as Hitachi and Recruit Holdings. At the center of investor concern is SoftBank’s heavy reliance on borrowing. The company has financed substantial investments across AI infrastructure, energy and robotics through debt, leaving it increasingly exposed to rising funding costs. Concerns have intensified as bonds issued by U.S. cloud computing provider CoreWeave have fallen to distressed levels, raising broader questions about the AI industry's ability to service its debt. SoftBank’s credit default swap (CDS) spread, an indicator of perceived credit risk, climbed to 432 basis points on Oct. 20, its highest level in approximately four years. The increase reflects growing investor concern over the company’s creditworthiness. In September, SoftBank raised $11.1 billion through a speculative-grade corporate bond offering to help finance Chairman Masayoshi Son’s AI investment strategy, underscoring the scale of its funding requirements. Uncertainty surrounding the profitability of AI investments has also weighed on sentiment. Kazuyuki Muramatsu, chief investment officer at Nagomi Capital, warned that raising capital could become increasingly difficult if AI-related business activity fails to generate tangible profits. Adding to investor concerns is intensifying competition facing OpenAI, in which SoftBank has committed substantial capital, from Chinese rivals offering lower-cost alternatives and competing on performance. Son himself has recently struck a more cautious tone on the potential risks of AI. At an international forum in Tokyo, the longtime AI optimist warned of the dangers posed by superintelligence if misused and called for international cooperation to govern increasingly powerful AI technologies. Nevertheless, he maintained his bullish long-term outlook, predicting that AI-related industries would account for 20% of global GDP by 2040. SoftBank’s outlook will ultimately depend on its ability to preserve the value of its Vision Fund portfolio while managing borrowing costs. If rapid growth in the AI sector fails to translate into sustainable profits, the company could face a cycle in which rising financing costs and declining asset valuations reinforce each other.