SoftBank’s 40% slide since October underscores mounting worry over its giant OpenAI bet

[TOKYO] Growing unease over frothy artificial intelligence valuations is weighing on shares of SoftBank Group, which traders increasingly view as a proxy for privately-held OpenAI.

The Japanese tech investor sits at the forefront of a global AI sell-off amid worries about new pressure on OpenAI following Alphabet’s Gemini 3.0 debut. SoftBank shares have plunged around 40 per cent since late October, erasing over 16 trillion yen (S$130 billion) in market value, as its founder Masayoshi Son prepares to double down on OpenAI and the infrastructure that supports it.

SoftBank has ridden the global AI investment boom faster than any other Japanese company. Its exposure to OpenAI – and a US$14.6 billion gain on that stake – helped it post a surprise 2.5 trillion yen net income in the fiscal second quarter, putting it on track for one of its highest annual profits.

SoftBank stock rose as much as 8 per cent on Wednesday (Nov 26) after the company said it completed its US$6.5 billion purchase of US chip designer Ampere Computing.

SoftBank still faces a US$22.5 billion December payment to OpenAI – part of the US$32 billion it has committed to the ChatGPT developer – and must finance its proposed US$5.4 billion acquisition of ABB’s robotics unit.

But that same exposure to the industry, and the billions it’s committing, also leaves SoftBank vulnerable to any signs that OpenAI could lose its lead.

Fears continue to swirl around the lofty valuations attached to AI-related companies. Earlier this month, when asked whether the sector was caught in an AI bubble, chief financial officer Yoshimitsu Goto – who, alongside Son, has lived through multiple boom-and-bust cycles – said he couldn’t say. “That’s something you only know for sure in hindsight,” he said.

“SoftBank’s steep share decline underscores its sensitivity to OpenAI rather than to broader AI-market weakness, at least lately. SoftBank shares are down 24 per cent since Google’s Gemini 3.0 was unveiled last week to positive reviews, heightening concern that growing competition will pressure OpenAI’s ambitious growth targets,” said Bloomberg Intelligence analysts Kirk Boodry and Chris Muckensturm.

“Assuming the December investment completes and OpenAI’s valuation reaches US$500 billion, SoftBank’s stake would account for just over 20 per cent of its net asset value. That propelled its shares higher from August to October, and the recent reversal.”

Son aims to make SoftBank a major player in an AI ecosystem he believes OpenAI will lead. He has sold SoftBank’s stakes in Nvidia and Oracle to raise firepower and is buying into AI chip designers, convinced future devices will need energy-efficient AI.

SoftBank now owns nearly 90 per cent of Arm Holdings, whose architecture underpins much of modern tech from phones to servers. Ampere Computing, a server-processor maker, is one of Arm’s customers.

SoftBank’s push into chipmaking may raise questions at a time when the world’s biggest tech companies are also designing their own AI chips, said Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors.

“Beyond its blind faith in going all in with its investments in OpenAI, what the market has totally ignored is the growing penetration of Risc-V in core designs of AI chips, which even Nvidia is adopting,” he said, referring to the open-sourced architecture that rivals Arm’s.

Risc-V is gaining ground in China, where fears are growing about reliance on Western technologies that may be barred in the future. “That’s the next chip that may fall,” Anvarzadeh said.

A wave of stock rotation could hit other Japanese AI names after reports that Meta Platforms plans to use Google’s Gemini AI chip fuelled concerns about Nvidia’s business.

Some analysts say Google’s move could be negative for Japanese components maker Ibiden, a major supplier of substrates used to make Nvidia chips. Ibiden shares fell about 4 per cent this week.

Meanwhile, Toppan Holdings is up about 11 per cent this week, partly on the view that the company will benefit from its large share of business with Broadcom, which designs AI chips with Google. Japanese chip-equipment makers such as Advantest may also gain, according to Maito Yamamoto, chief analyst at Nissay Asset Management.

“The phase of indiscriminate buying of AI-related stocks has ended, and selection will become more stringent going forward,” said Kazunori Tatebe, chief strategist at Daiwa Asset Management. BLOOMBERG