Single-day plunge of over 10%—is the cost of SoftBank's heavy bet on OpenAI starting to show?

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SoftBank's stock price plummeted more than 11% in a single day on Thursday, putting the Japanese tech investment giant’s high-leverage AI betting strategy in the spotlight.

According to CNBC, SoftBank’s share price has surged about 70% so far this year, at one point surpassing Toyota to become Japan’s most valuable company by market cap, but analysts warn that market optimism is masking its increasingly risky balance sheet.

S&P Global Ratings downgraded SoftBank’s credit outlook to negative in March, citing concerns that its large additional investment in OpenAI would harm the company's asset liquidity and financial position.

This sharp stock drop makes one core issue increasingly urgent: Is SoftBank’s highly concentrated bet on OpenAI a lever to wealth, or a trigger for a liquidity crisis?

Leveraging AI Bets, Debt Levels Staggering

This AI gamble, led by SoftBank founder Masayoshi Son, is far bigger than outsiders imagined.

By the end of 2025, SoftBank’s interest-bearing debt on a standalone basis will reach approximately 16.3 trillion yen (about $104 billion). In March this year, SoftBank also secured a $40 billion bridge loan for additional investment in OpenAI and general corporate purposes.

S&P Global estimates that after SoftBank’s $30 billion in additional investment in OpenAI, OpenAI’s weight in its portfolio will rise to about 30%, approximately on par with chip designer Arm Holdings.

Gil Luria, Head of Technology Research at Davidson Equity Capital Market, said: "SoftBank has turned itself into a highly leveraged AI bet, which holds huge upside as well as significant risk."

OpenAI Valuation Pressured, Liquidity Concerns Emerge

SoftBank’s degree of dependence on OpenAI is causing unease among some market participants.

After completing a record-breaking $122 billion financing round in March this year, OpenAI’s valuation reached $852 billion. SoftBank is hoping that OpenAI can IPO at its current or a higher valuation, resulting in a hefty return.

However, the risks are equally significant. Richard Windsor, founder of equity research firm Radio Free Mobile, warned: "SoftBank’s risk exposure keeps expanding. If OpenAI fails to deliver as expected, SoftBank is highly likely to face a liquidity crisis."

Jay R. Ritter, emeritus professor at Warrington College of Business, puts it more plainly: "Buying SoftBank is, to some degree, a leveraged bet on OpenAI. If OpenAI performs well, leverage is a booster; if OpenAI and other investments underperform, leverage will backfire on SoftBank."

Luria also noted that if OpenAI fails to IPO at its current or a higher price, given SoftBank’s level of exposure, the pressure could be substantial.

SoftBank is no stranger to the cost of concentrated bets. Its Vision Fund invested billions in the co-working unicorn WeWork, but WeWork’s valuation collapsed due to its business model and governance issues—compounded by the pandemic—and filed for bankruptcy in the U.S. in 2023, resulting in SoftBank’s accumulated investment loss exceeding $14 billion.

Bulls vs Bears: Debt Sustainability in Dispute

Not all investors are pessimistic about SoftBank’s outlook.

Richard Kaye, portfolio manager at asset management firm Comgest, believes SoftBank’s assets can still comfortably cover its debt obligations, maintaining a loan-to-value (LTV) ratio below 25%. "SoftBank’s debt is sustainable because its total borrowing to immediately liquid equity value ratio is below 25%," said Kaye, adding that lenders remain willing to accept SoftBank equities as collateral for financing.

He also believes that even if OpenAI disappoints, it will not trigger a solvency crisis. "An OpenAI underperformance should be reflected as a one-off writedown, but will not necessarily result in a liquidity crisis since SoftBank holds ample equity assets to offset such losses."

Masayoshi Son himself recently defended SoftBank’s aggressive AI strategy in an interview with CNBC, claiming the scale of this technological revolution is "50 times" that of the Internet bubble era, and insisted that if there is a correction in AI-related stocks in the future, it should be viewed as a buying opportunity rather than a structural threat.

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