SoftBank Group Corp. experienced a turbulent trading session on Thursday, with shares declining nearly 4% to 5,725.0 yen, despite reporting impressive fourth-quarter earnings. Initially, the stock showed positive momentum, registering an early-day rise, but ultimately fell short of matching the broader market’s 0.2% increase.
For the quarter ending March 31, SoftBank reported a net profit attributable of 1.829 trillion yen (approximately $11.61 billion), significantly exceeding Bloomberg’s projections of 295.2 billion yen and more than tripling the previous year’s profit of 517.18 billion yen. While the earnings report was commendable, the surge was primarily fueled by a remarkable increase in the valuation of its investment in OpenAI, which stood at $79.6 billion at the end of March. This marked a substantial gain of $45 billion from SoftBank’s initial investment.
However, this soaring profitability has raised alarm among some investors, primarily due to SoftBank’s heightened debt levels taken on to finance its substantial stake in OpenAI. The company currently carries an outstanding debt of $17.5 billion from a $40 billion bridge loan specifically allocated for this investment. In fiscal 2025, SoftBank is projected to invest around $30 billion into the company behind ChatGPT and has liquidated various assets, including shares in Nvidia Corp, to support these actions. Loans secured against holdings in chip designer Arm and the telecommunications unit SoftBank Corp. have also played a role in funding this investment.
While OpenAI’s valuation surged from $500 billion in an October funding round to an impressive $852 billion in March, skepticism surrounding the startup has arisen. Reports from the Wall Street Journal in late April indicated that OpenAI had fallen short of critical internal targets related to user engagement and revenue, prompting concerns over its competitive standing in the AI sector. Rivals, including Anthropic and industry giants like Google, are reportedly releasing AI models that may surpass OpenAI’s offerings.
Additionally, challenges regarding OpenAI’s governance and strategic spending commitments have emerged. CEO Sam Altman has committed the company to approximately $600 billion in infrastructure investments over the coming years, coinciding with speculation of a possible initial public offering later this year.
Amid these uncertainties, S&P Global Ratings downgraded SoftBank’s outlook in March, voicing concerns about the company’s asset liquidity and financial health in light of its significant investment in OpenAI. Despite these challenges, SoftBank CEO Masayoshi Son remains optimistic about the future of OpenAI, emphasizing that this investment represents the company’s overarching commitment to advancing AI technology.
