SoftBank Market Value Poised to Halve From Peak as AI Fears Grow

(Bloomberg) -- SoftBank Group Corp.'s ( SFTBY ) market value is poised to halve from its peak in June, as higher borrowing costs fuel investor concerns over the sustainability of its massive investments in artificial intelligence.

Shares of the Tokyo-based company fell as much as 6.7% on Thursday, taking their drop from an all-time high on June 2 to 50%, with earnings from US megacaps failing to ease the angst.

Global concerns over AI spending had accelerated after US-based cloud-computing provider CoreWeave Inc.'s bonds fell to levels associated with distress, exposing financing risks across the industry.

"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. If global sentiment toward the AI growth story turns sour, it may lead to valuation losses for SoftBank's Vision Fund, which would in turn result in higher premium for future funding, he said.

Read: CoreWeave Stock Wipeout Exposes Divide Between AI Fear and Greed

The price to insure SoftBank's debt against default has climbed, with credit-default swaps rising to the highest level in nearly four years on Tuesday. With the company relying on debt financing for much of its investments across the AI ecosystem, ranging from infrastructure and energy to robotics, CoreWeave's troubles dented confidence even in equity investors who had earlier focused on returns from SoftBank's AI bets. The stock is down more than 30% so far this month, wiping out all gains from September.

Read: SoftBank Group Credit Risk Hits 4-Year High on AI Funding Strain

Rising competition among AI models also remains an overhang. OpenAI, in which SoftBank has invested almost $65 billion, now faces more affordable Chinese rivals offering comparable performance.

SoftBank raised $11.1 billion in September via the largest corporate junk bond sale on record to finance founder Masayoshi Son's big AI ambitions.

With assistance from Hideyuki Sano and Gregory Turk.