After SoftBank's stock price soared by 70%, it faces the "OpenAI reality test": Can the $60 billion bet convince the market?

The sharp rise in the share price of SoftBank Group is about to face a fundamental test next week. Investors are eager to obtain confirmation - whether the company's billions of dollars bet on the increasingly troubled OpenAI is worth it. SoftBank's technology investment group, under the leadership of Masayoshi Son, will announce its annual financial report on May 13. The market generally expects that, thanks to its strong performance in AI-related investments (including holding 90% of the shares of CPU chip design company Arm Holdings), the company's profits will be substantial. However, concerns in the market about how SoftBank will continue to fund OpenAI and whether this bet will truly bring returns could dampen the celebration. Analyst Kirk Boodry said, "If investors start to overly worry about the balance sheet, the discount on SoftBank shares will widen. When they invested last year, although the amount was huge, investors could still accept it because OpenAI represents the future. But now, doubts have emerged." SoftBank's currently high valuation further amplifies the cautious sentiment in the market. Driven by the AI craze and signs of soaring demand for Arm CPUs, SoftBank's stock price has soared by about 70% in the past month, nearing historic highs. Boodry said, the stock now appears to be "bubbling." Investor doubts about SoftBank's bet on OpenAI are intensifying - SoftBank is expected to invest over $60 billion in exchange for approximately 13% ownership of OpenAI. This reflects a reevaluation of the prospects of Sam Altman's startup in the background of rising competitors like Anthropic. The battle for users of generative AI is becoming fiercer, coupled with lawsuits brought up by Elon Musk, and reports that OpenAI's revenue has not met its targets, all casting shadows on the future of this ChatGPT developer. This contrasts sharply with the situation when SoftBank promised its initial major investment in March 2025. Kazuhiro Sasaki, head of research at Phillip Securities Japan, said, "The association between SoftBank and OpenAI may ultimately turn negative, and this risk exists. The market has concerns about OpenAI's future business. For SoftBank, this is likely to be a huge, costly experiment." To provide funding for this bold bet on OpenAI, SoftBank is seeking a record-breaking $40 billion bridge loan. S&P downgraded SoftBank's credit outlook from "stable" to "negative" in March, citing concerns about its financial pressure. Analyst Boodry said investors will expect SoftBank to provide information about asset sales in their financial report next Wednesday, to help alleviate concerns about the balance sheet. He pointed out that SoftBank has already divested its holdings in Nvidia and its stake in T-Mobile US Inc. could be the next target for sale. Boodry also added that shareholders hope SoftBank will provide specific details on how much revenue they expect to generate through their partnership with OpenAI. If SoftBank fails to ease investor anxiety, its stock price is likely to come under pressure. The stock rose 18% in the Tokyo market on Thursday, and the P/E ratio has climbed to its highest level since mid-January. The higher the valuation, the more inclined investors are to scrutinize carefully. Fabien Yip, market analyst at IG International, said, "Investors are now stress-testing the economics of trades, rather than just cheering for headline news. The days when a press release from OpenAI could revalue stocks are gone." However, strong performance could provide support for SoftBank's stock price. According to market consensus expectations, analysts expect SoftBank to achieve a net profit of approximately 3.25 trillion yen (about $21 billion) in the fiscal year ending in March, the highest level since 2021. The short position in SoftBank's stock has dropped to below 1% of outstanding shares, a four-month low, indicating that few believe there will be massive sell-offs after the financial report. Investors are also eager to learn whether SoftBank's previously reported plan to establish an AI and Siasun Robot & Automation entity in the US and seek an IPO will materialize. A successful IPO could generate cash flow, helping to alleviate market concerns. Yip of IG believes that to sustain long-term growth in its stock price, SoftBank needs to convince the market that its bet on OpenAI is not just based on speculation. "In this age of rampant AI ambitions, balance sheet discipline is becoming a subdued differentiating factor," she said.