TOKYO, Aug 4 — Technology investor SoftBank Group is set to report its first-quarter earnings on Thursday, with analysts closely watching how it will continue to finance its substantial investment in OpenAI amid concerns over increasing leverage on its balance sheet.

SoftBank has emerged as one of the largest backers of OpenAI, committing over $60 billion to the AI firm and related infrastructure projects under founder Masayoshi Son's vision to dominate the AI investment space. Despite announcing a record net profit for the fiscal year ending March 2026, SoftBank's share price has fallen by nearly half since early June, and the cost to insure its debt against default has surged.

Analysts polled by LSEG expect SoftBank to post a net profit of 148.4 billion yen ($941.2 million) for the April-June quarter. Son recently dismissed suggestions of an AI bubble as "blasphemy," and 15 out of 20 sell-side analysts surveyed by LSEG rated SoftBank stock as a buy or strong buy in August.

OpenAI is reportedly seeking an IPO valuation of $1 trillion, up from $852 billion, though a New York Times report indicates the IPO may be delayed until next year. However, some experts, including Anvarzadeh, estimate OpenAI's true value to be closer to $300 billion, based on smaller IPO plans by Chinese competitors.

Financial scrutiny is intensifying as AI companies face growing financing needs and increased debt usage. SoftBank's internal loan-to-value ratio was reported at 17% at the end of March, but S&P's broader calculation, which includes margin loans backed by investee company shares, estimates it at 33%.

Concerns remain that a significant drop in asset prices could trigger liquidity challenges. While Arm, another SoftBank asset, is viewed as having a solid credit profile, OpenAI is considered a weaker credit due to its startup status, innovation risks, and competitive pressures. Market pressure on SoftBank, Arm, and memory stocks is expected to persist until there is clear evidence of a productivity surge driven by end users and corporations.

Notable Quotes

  • "We think Arm has a solid credit profile but OpenAI is very weak. It's a startup with significant AI innovation risk and lots of competition."
  • "As of March I can say our loan to value and cash position have been improving."
  • "If Arm's valuation drops, the value of the loan against it does not."
  • "A significant drop in the price of its assets could mean a liquidity squeeze."
  • "SoftBank, Arm and memory stocks are likely to continue to come under pressure until end users and corporates show that this is the beginning of a productivity surge."

Sources