SoftBank Group faced its biggest credit warning in four years on Friday, November 6, as growing AI concerns shook global markets. The Japanese technology investor saw its shares fall 10.8% as investors questioned whether its massive AI investments could deliver expected returns.
The company's five-year credit default swap (CDS) spread climbed to 466 basis points, its highest level since October 2022. Rising debt, delayed returns from OpenAI and uncertainty around data center development have increased concerns about SoftBank's financial position.
The CDS spread later stood at 457.50 basis points, according to Markit data. At this level, market data indicated a 30.6% implied default probability. This figure reflects market expectations rather than a prediction of an actual default.
SoftBank has become a major indicator of investor confidence in the AI industry. The company holds a USD 64.6 billion investment in OpenAI and owns 90% of chip designer Arm. Its subsidiary SB Energy also supports large data center development projects.
However, these investments have increased pressure on the company's finances. SoftBank has borrowed more money at record interest rates to support its OpenAI investment. OpenAI's decision to delay its planned public offering until 2027 has also pushed back potential returns.
Political changes in the United States have added another challenge for AI infrastructure companies. Recent Democratic Party victories in the midterm elections have raised concerns about future data center construction. Around one-third of planned US data center capacity for 2027 and 2028 could face development delays.
SoftBank's energy subsidiary also faces uncertainty around its planned stock market debut. SB Energy filed for a public listing in September with a potential valuation of USD 50 billion. However, reports suggest the company may delay its listing until December or later.
Amir Anvarzadeh, Japan equity market strategist at Asymmetric Advisors, said investors have started pricing in slower data center development. He also expects further market pressure as concerns about AI infrastructure returns grow.
SoftBank shares have now lost nearly half their value since early September. The decline highlights a growing shift in investor focus from AI expansion toward profitability. Investors increasingly want technology companies to prove that their heavy spending can generate sustainable returns.
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