SoftBank's Strong Quarterly Report Expected, OpenAI's Debt Pressure Becomes Focus

SoftBank's OpenAI bet is approaching a delicate tipping point—profits are looking better, but the financing capacity that underpins this wager is sparking increasing concerns.

SoftBank is expected to release financial reports for the period from January to March on Wednesday, with analysts forecasting net profits of around 236 billion yen (approximately $1.5 billion). Meanwhile, Krish Sankar, an analyst at TD Cowen, estimated that by the end of March, SoftBank's approximately 11% stake in OpenAI is already valued at $80 billion, a significant increase from the $54.4 billion at the end of last year—OpenAI's valuation jumped to $840 billion in its latest round of funding in February this year.

"All-in" on OpenAI, but financing pressure is starting to show

This year, SoftBank also plans to add an additional $30 billion investment in OpenAI; if OpenAI goes public as planned between the end of 2026 and the beginning of 2027, it will further contribute to paper profits. However, the highly concentrated investment structure in a single private company is raising questions about its sustainability, with some drawing comparisons to SoftBank's heavily invested shared office company WeWork, which eventually went bankrupt.

Analyst Atul Goyal from Jefferies pointed out that SoftBank has provided most of the funds in OpenAI's recent rounds of financing, which has supported OpenAI's continuously climbing valuation. To maintain its investment commitment, SoftBank has had to continuously increase its borrowing.

In March of this year, SoftBank had arranged $40 billion in bridge loans for its OpenAI investment. However, according to media reports, its plan for additional margin loans secured by OpenAI equity was forced to shrink due to the hesitant attitude of some creditors. Subsequently, S&P Global Ratings adjusted SoftBank's credit outlook to negative, judging that "its asset liquidity, portfolio quality, and financial capacity may deteriorate due to the massive additional investment in OpenAI."

Another $25 billion investment commitment by 2026

The financing pressure is not limited to this. TD Cowen estimated that, in addition to OpenAI, SoftBank still has about $25 billion in investment commitments to fulfill this year, including $16 billion for the Stargate data center project and $9 billion for the acquisition of ABB Robotics and DigitalBridge. It is also reported that SoftBank is planning to set up and list a separate AI and robotics company in the United States, with a target valuation of $100 billion, as one of the means to alleviate investment pressure.

Stock price almost doubled, and the market is still buying

Despite the ongoing controversies, the stock market is still voting with its feet. Since the beginning of April, SoftBank's stock price has nearly doubled, approaching the historical high of 6923 yen set in October last year. At the end of April, Nomura Securities analyst Masao Masuno raised SoftBank's target price to 7500 yen, believing that its self-developed AI accelerator and AI robotics business will continue to provide upward catalysts for the long term, "although the recent increase has narrowed the upside space."

SoftBank's story, in essence, is a big bet on the future value of AI. If they bet right, the returns are astonishing; but if the financing chain cracks before OpenAI goes public, the cost of this grand bet is also not to be underestimated.