Masayoshi Son-led SoftBank Group is facing growing financial and strategic pressure as concerns about the profitability of the Japanese conglomerate’s artificial intelligence (AI) investments, rising borrowing costs, and regulatory setbacks weigh on investor confidence.
Shares of the Japanese technology investor fell 10.8% on Friday, extending their decline to almost 50% since the beginning of September.
The selloff came as global financial markets reassessed the prospects of the AI boom and questioned whether the massive investments in data centers, computing infrastructure, and advanced AI models would generate sufficient returns.
The cost of insuring SoftBank’s debt against default also climbed to its highest level in four years, highlighting growing concerns about the group’s financial exposure to the AI industry.
SoftBank has emerged as a key indicator of investor sentiment towards AI infrastructure and advanced technology investments due to its substantial exposure to the sector.
The company has invested USD 64.6 billion in OpenAI, holds a 90% stake in chip designer Arm, and finances data center development through its subsidiary SB Energy.
However, its increasing reliance on debt to fund AI investments has attracted greater scrutiny, particularly as the timeline for generating returns remains uncertain.
SoftBank’s financial position has come under pressure as it takes on additional debt to finance its investment in OpenAI, the developer of ChatGPT.
The Japanese group has borrowed at record yields to support its exposure to the AI company, while expectations of an eventual return have been pushed further into the future following OpenAI’s decision to delay its planned public offering until 2027.
This has raised questions about how quickly SoftBank can monetise its AI investments and whether the expected growth in the sector will translate into sustainable profitability.
The company’s exposure to data center development has also become a concern as investors reassess the pace of infrastructure spending.
The Democratic Party’s massive gains in the recently concluded US midterm elections have added another layer of uncertainty, with investors concerned that political opposition to AI could slow the development of large-scale data centers.
SoftBank’s data centre ambitions have also faced uncertainty through SB Energy, which filed for a public listing in September at a potential valuation of USD 50 billion.
However, media reports indicated that the initial public offering (IPO) had been delayed until December or later.
The company’s IPO filing projected revenue of approximately USD 439 billion based on its contracts with end-users.
However, SB Energy does not currently have operational data centres and remains substantially dependent on OpenAI.
The gap between its projected revenue and existing infrastructure has become an important consideration for investors assessing the company’s valuation and ability to deliver on its commitments.
SoftBank’s financial challenges have further coincided with a significant setback to its ambitions in robotics.
China’s National Development and Reform Commission (NDRC) has prohibited the Japanese investment group’s planned USD 5.4 billion acquisition of the robotics business of Swiss engineering company ABB, according to ABB.
The decision marks the second major foreign technology acquisition blocked by Chinese authorities this year.
In April, Meta was ordered to unwind its more than USD 2 billion acquisition of artificial intelligence startup Manus.
The latest decision reflects Beijing’s increasing scrutiny of foreign investments involving strategically important technologies.
While Son has identified robotics as a central component of the group’s long-term AI investment strategy, the proposed ABB acquisition was expected to strengthen the company’s position in industrial robotics and automation.
According to people familiar with the transaction, Chinese authorities were concerned about the potential transfer of sensitive data to the United States and SoftBank’s connections with Western technology companies, including OpenAI.
Another concern involved a Japanese company gaining control of strategically important technology amid strained relations between China and Japan over Taiwan.
China is particularly important to ABB’s robotics operations.
The world’s second-largest economy accounts for approximately 30% of the company’s robotics business, with ABB operating around 30 local companies and employing approximately 15,000 people across nearly 130 cities.
Its Shanghai engineering operation also houses ABB’s global robotics headquarters and serves as an important research and development center and production base.
ABB said it remained in close dialogue with SoftBank and was working towards a solution.
The challenges have extended beyond SoftBank’s direct investments in AI and robotics.
SoftBank-backed digital payments company OPay withdrew its planned USD 304 million US IPO on Friday, citing a regulatory inquiry by an unidentified foreign jurisdiction.
The Nigeria-focused fintech company said the inquiry concerned a jurisdiction it considered immaterial to its core operations. However, it did not disclose the regulator involved or the nature of the investigation.
OPay stressed that the matter should not be interpreted as reflecting its business performance, financial condition, operational integrity, or regulatory standing.
The company also said the inquiry would not affect its operations, customer services, or regulatory position in Nigeria and its other markets.
The withdrawal came after OPay had priced 16 million American depositary shares at USD 19 apiece, the bottom of its targeted USD 19-USD 21 range.
The proposed offering would have valued the company at approximately USD 4 billion.
SoftBank-related entities held a 6.6% stake in OPay before the planned offering.
Founded in 2018, OPay provides digital financial services across emerging markets, including Nigeria and Indonesia. Its platform offers payments, money transfers, savings, and lending services, particularly in economies where access to traditional banking remains limited.
The company raised USD 400 million in 2021 at a valuation of USD 2 billion and reported approximately 50 million monthly active users as of July 31, according to its IPO prospectus.