SoftBank Group shares recovered on Wednesday, climbing 2.2% in Tokyo trading after an 8.5% sell-off the previous day. The rebound signals that some investors see the recent drawdown as an opportunity to re-enter one of Asia's most aggressive artificial intelligence plays.
The stock had fallen to 5,310 yen on Tuesday, leaving it roughly 38% below its June peak. Despite the volatility, SoftBank's commitment to AI remains substantial, with its total backing of OpenAI now reaching $64.6 billion. The group has also raised $11 billion through a record high-yield bond sale to fund its AI strategy.
Tuesday's plunge may have gone too far
The sharp decline on Tuesday came amid a broader sell-off in AI-related equities, driven by concerns over stretched valuations, competitive pressure from Chinese firms, and doubts about whether massive AI spending will translate into adequate returns. Analysts suggest that Tuesday's drop was more a reflection of market-wide positioning than a company-specific problem.
Mizuho analyst Daniel O'Regan told Barron's that there was no single "smoking gun" behind the AI sell-off, but rather a combination of weak memory and optical stock performance, negative headlines, and investors reducing risk after a strong run. SoftBank had already been declining before Tuesday, with shares down 38% from their June high.
AI concentration is both risk and opportunity
SoftBank's growing AI exposure is a double-edged sword. On one hand, it represents the company's biggest vulnerability; on the other, it is the primary reason some investors still see significant upside. The group's OpenAI investment now totals $64.6 billion, while holdings in Arm and SB Energy further tie its valuation to the broader AI infrastructure build-out.
Morningstar senior equity analyst Dan Baker told Reuters that SoftBank's valuation effectively assumes a major AI-driven transformation of work. "If that goes ahead, it's hard to see their investments not being very successful," Baker said. This highlights the core contradiction: investors buying SoftBank are not ignoring concentration risk; rather, some are buying because that concentration creates large upside if OpenAI and related infrastructure investments continue to appreciate.
SoftBank Investment Advisers CEO Alex Clavel explained that the group borrowed funds partly because it did not want to sell assets it believes will keep rising in value. This strategy, however, comes with increasing costs.
Expensive debt raises the hurdle
The risk is that SoftBank's funding costs are rising alongside its AI exposure. Its latest $11 billion bond sale included debt yielding as much as 9.75%, compared with 5.2% on a similarly dated Alphabet bond. SoftBank's credit-default-swap spreads have also climbed since June, reflecting higher perceived risk.
This means that SoftBank's AI assets must generate returns large enough to compensate for both concentration and expensive financing. MST Financial analyst David Gibson told Reuters that SoftBank's strategy has become binary, likening it to betting on red or black rather than spreading bets widely.
Wednesday's rebound does not mean investors have stopped worrying about SoftBank's AI exposure. It suggests that some now believe the 38% drawdown has made the potential OpenAI payoff attractive again. The market's renewed interest underscores the delicate balance between risk and reward in the AI sector.
This article is for informational purposes only and does not constitute financial advice.
