SoftBank faces higher risks as tech stocks fall and AI bets slide

In short: A broad sell-off in tech stocks is putting extra pressure on SoftBank because many of its biggest investments are tied to AI.

What's going on

SoftBank’s share price has fallen about 60 percent since June, after rising earlier on excitement about artificial intelligence. The Financial Times reports that a shift in investor mood, plus new political uncertainty in the US, has made SoftBank more exposed than many peers.

A key issue is that SoftBank’s investments are now heavily concentrated in the same area. Analysts quoted by the FT say SoftBank used to look more like a mixed investment company, but today many bets depend on the AI boom continuing. That means when the market drops, SoftBank feels it more, like a shop that sells only one product when demand suddenly slows.

Some of SoftBank’s largest holdings have also fallen sharply. Arm, the UK chip designer in SoftBank’s portfolio, is down about 60 percent since June. The FT also notes that SoftBank has committed around $65bn to OpenAI, the company behind ChatGPT, and OpenAI is a major expected customer for parts of SoftBank’s planned US data center buildout (data centers are large buildings packed with computers that run online services).

What to watch

SoftBank reports half-year earnings on Tuesday, and investors will be watching its ability to keep funding big projects while asset values fall. The FT says SoftBank’s SB Energy, a US energy infrastructure business linked to data center plans, may delay its planned stock market listing, which could slow other plans. Investors are also watching the timing and value of future IPOs for AI companies, including OpenAI, because weak results from rival listings could spill over into SoftBank’s finances.

Source: Financial Times