SoftBank Group's stock has extended its sharp decline, with shares falling to ¥4,305 on Thursday, the lowest level since April and 53% below the year's peak. The sell-off comes as concerns over the artificial intelligence sector intensify, with the company's bond yields also climbing to multi-year highs.
The Japanese conglomerate, led by Masayoshi Son, has positioned itself as a major player in the AI boom. Its involvement in the Stargate project, a joint venture with OpenAI and Oracle, aims to invest $500 billion in U.S. data centers. Additionally, SoftBank has committed $64.6 billion to OpenAI for a 13% stake, with plans to invest up to $100 billion. These moves prompted S&P Global to downgrade SoftBank's credit rating.
However, the AI investment thesis is facing headwinds. OpenAI's ChatGPT, while still a leader, has seen its market share erode as competitors like Anthropic's Claude, DeepSeek, and Moonshot gain traction. Recent reports indicate OpenAI's annualized revenue is below $50 billion, missing analyst expectations by $20 billion, while Anthropic reported over $16 billion in third-quarter revenue. This financial pressure has led OpenAI to postpone its IPO to next year.
The broader AI sector is showing signs of froth. The AI Stock Bubble Index has jumped to an extreme level of 74, according to data, signaling heightened risk. Prominent investors like Ken Griffin and Ray Dalio have warned of a potential bubble burst, with Dalio pointing to rising bond yields as a possible trigger. Gartner has also cautioned that AI infrastructure companies would need to generate $8.5 trillion in revenue to justify capital spending, far above the projected $3.6 trillion.
SoftBank's bond yields reflect growing investor unease. A $500 million bond maturing in 2035 now yields 6.34%, up from a year-to-date low of 5.069%, while bonds maturing in 2036 yield 9.3%, indicating higher risk premiums demanded by investors.
Technically, SoftBank's stock has broken below key support levels. The daily chart shows a decline from ¥9,063 in June to the current ¥4,305, falling under the critical support at ¥4,480. The shares have also slipped below the 50-day and 200-day moving averages, which are on the verge of forming a death cross, a bearish signal. Additionally, the stock has moved below the Supertrend indicator and the Ichimoku cloud, suggesting further downside potential toward the psychological level of ¥4,000.
The sell-off in SoftBank is part of a broader market correction in AI-related stocks, as investors reassess valuations amid concerns about sustainability and profitability. The company's heavy reliance on OpenAI's success makes it particularly vulnerable to any negative developments in the AI space.
As the AI bubble index continues to rise, market participants are closely watching for signs of a correction. The combination of high valuations, rising bond yields, and competitive pressures could trigger a significant pullback, impacting not only SoftBank but the entire tech sector.
This article is for informational purposes only and does not constitute financial advice.
