S&P downgraded SoftBank's rating to negative, saying its $30 billion investment in OpenAI may undermine credit quality.

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S&P Global has downgraded SoftBank Group’s credit outlook from stable to negative, citing its plan to further invest $30 billion in OpenAI, which could harm its liquidity and asset credit quality. This rating action has raised new doubts about the financial soundness of the Japanese tech investment giant.

In a statement on Tuesday, S&P maintained SoftBank’s long-term issuer credit rating at “BB+” but warned that if SoftBank fails to quickly implement measures such as asset sales to mitigate risks, the rating will face further downward pressure. SoftBank, for its part, expressed appreciation for S&P’s maintenance of the long-term rating, with its spokesperson stating by email:

“S&P fully considered our strong track record in managing our financial base under stress.”

The downgrade in outlook directly affects the market's assessment of SoftBank’s debt risk. S&P clearly pointed out that OpenAI is one of the weakest assets in SoftBank’s portfolio in terms of credit quality, and as the proportion of unlisted assets sharply rises, the overall liquidity of SoftBank’s investment portfolio will further deteriorate.

Additional Investment Plan: Three phases, holding increases to 13%

Last month, SoftBank announced it will further boost its investment in OpenAI by $30 billion on top of the over $30 billion already injected, planning to complete the total investment in three batches of $10 billion each within this year. After the additional funding, SoftBank’s stake in OpenAI will increase from about 11% as of last December to 13%.

S&P noted that at that point, OpenAI will account for a proportion of SoftBank’s portfolio comparable to Arm Holdings, the British chip designer. More importantly, the share of unlisted assets in SoftBank’s portfolio is expected to surge from an estimated 42% in December last year to over 50%, which will significantly weaken the liquidity of its overall portfolio.

Credit Concerns: High risk for AI startups, liquidity pressures intensify

S&P has expressed clear concerns regarding the credit quality of SoftBank’s AI investments. In its statement, S&P said:

“SoftBank’s investments in the AI sector, including in OpenAI, mostly involve early-stage startups and privately-held companies, which we believe face significant risks of AI innovation and intense competition.”

The additional investment may also drag down the loan-to-value ratio long used by SoftBank to measure its debt repayment ability. S&P said that if the liquidity of SoftBank’s portfolio does not improve, rating pressure will continue to rise and specifically cited asset sales as a key relief measure, while also noting uncertainties in the timing of such sales.

Last year, SoftBank funded its founder Masayoshi Son’s AI bets by selling stakes in companies such as T-Mobile US and Nvidia.

Path to Rating Improvement: IPO and asset sales are key

S&P clearly outlined the conditions for raising SoftBank’s outlook again: to improve portfolio liquidity via IPOs of assets including OpenAI, maintain portfolio quality, and increase loan-to-value ratio through asset sales.

Bloomberg Intelligence credit analyst Sharon Chen pointed out that S&P has issued a negative outlook rather than a credit watch, giving SoftBank some time—to lower the adjusted LTV below 35% by selling assets, and noting that OpenAI’s IPO is also a necessary condition for improving portfolio liquidity.

However, she also warned that rising geopolitical risks and a potential AI bubble may suppress tech asset valuations, keep LTV under pressure, and could further delay OpenAI’s already uncertain IPO schedule.

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