SoftBank Group's credit risk rises to a four-year high as its AI bet and acquisition rumors heighten leverage concerns.

SoftBank Group's credit risk indicatorcredit default swaps (CDS)has risen to its highest level in nearly four years, driven by heightened market concerns over AI-related financing and potential large-scale acquisitions. Market-compiled data show that SoftBank's five-year CDS stood at 432 basis points on Tuesday, the highest since early November 2022. After breaching 400 basis points a week earlier, the indicator has widened by more than 30 basis points further. Financial pressure at U.S. cloud computing service provider CoreWeave (CRWV.US) has drawn attention to the debt problems steadily accumulating behind the AI investment boom, and SoftBank, as one of the most aggressive capital deployers in the AI space, has also become a focus of scrutiny. This major compute leasing provider within the NVIDIA Corporation ecosystem has debt and financial obligations exceeding $50 billion, and its five-year CDS spread at one point surpassed 1,100 basis points, with market pricing reflecting a default probability of more than 60%. Meanwhile, SoftBank is weighing an acquisition of U.S. security services giant Allied Universal, and combined with rising financing costs, market scrutiny of its financial pressure is also intensifying. SoftBank is in the early stages of talks considering an acquisition of Allied Universal, whose equity is valued at up to about $18 billion and which carries about $12 billion in public debt, putting its enterprise value including debt potentially close to $30 billion. Credit analyst Sharon Chen expects SoftBank to have at least $6 billion in cash outflows in the fiscal year ending March 2027, and further AI investments will intensify its funding needs. In her report, she said SoftBank "will need to raise new funds for the deal," and its loan-to-value ratio could approach the company's self-imposed 25% ceiling. SoftBank Group's share price has performed weakly recently, down about 50% from its June high.