AI megabet backfires! SoftBank (SFTBY.US) posts massive Q2 loss of $7.1 billion, dragged down by data center project writedowns and weakening tech stock holdings.

SoftBank (SFTBY.US) recorded its first net loss in nearly two years, as a US data center project generated a US$3.7 billion writedown, compounded by growing concerns over the sustainability of artificial intelligence (AI) growth that hit the investment giant's major holdings. The earnings report showed that SoftBank posted a loss of JPY1.12 trillion (approximately US$7.1 billion) in its second fiscal quarter, a sharp reversal from a profit in the same period last year and far worse than analysts' average expectation of JPY129 billion in profit. The loss is reportedly mainly related to non-refundable advance payments SoftBank made for a data center campus project in Ohio, used to secure equipment supply and manufacturing capacity. Meanwhile, share price declines in chipmaker Arm (ARM.US), Intel Corporation (INTC.US), and South Korean e-commerce giant Coupang (CPNG.US) weighed on SoftBank's overall performance. The Vision Fund business segment, which manages equity stakes in hundreds of tech startups, recorded a loss of JPY81.6 billion, while the market had originally expected a profit of JPY222 billion. Notably, the earnings report showed that SoftBank has completed its previously committed additional investment in OpenAI, totaling US$30 billion. The investment was completed through SoftBank Vision Fund II in three tranches, invested on April 1, July 1, and October 1, 2026, respectively, with each tranche amounting to US$10 billion. Following the completion of the additional investment, SoftBank's cumulative investment in OpenAI reached US$64.6 billion, representing a stake of approximately 13%. SoftBank said the third US$10 billion investment was completed on October 1, funded by foreign currency senior bonds the company issued in September. With the completion of this investment, the bridge financing facilities SoftBank had previously arranged for the additional investment have all been cancelled, and the related borrowings have been repaid. SoftBank is increasingly being viewed as a "bellwether" for sentiment toward OpenAI and the broader AI sector. Amid market concerns over the debt it has taken on for large-scale AI investments and the possibility that a sweeping Democratic victory in the US midterm elections could stall multiple AI projects backed by Masayoshi Son, SoftBank's share price has plunged more than 50% since hitting an all-time high in June. As Masayoshi Son's multibillion-dollar AI projects continue to pile up, with the revenue returns these projects may generate in the future remaining largely uncertain, investors are growing increasingly worried about this spending surge. From bonds to share-backed loans to financing secured by OpenAI equity, SoftBank is raising funds for AI investments through multiple channels. The growing array of financing instruments also means its balance sheet is more sensitive to interest rates, credit spreads, and changes in the valuation of its AI assets. Masayoshi Son has many AI-related bets, the most eye-catching of which is his massive wager on OpenAI. If OpenAI's valuation keeps climbing and its IPO proceeds on schedule, this could become another masterstroke in Son's life. But the wind has now shifted. As the ceiling on AI valuations has come down, OpenAI's IPO has been delayed to 2027. This means SoftBank's heavy position cannot be monetized through public markets in the short term, while the debt interest supporting this position accrues quarterly and daily. The pressure quickly transmitted to the bond market. The spread on SoftBank's five-year credit default swaps (CDS) surged to 466 basis points, the highest since October 2022. The market is worried: will SoftBank's financial condition become the next risk point in the AI chain? For SoftBank's investors, the core contradiction is now shifting to "when AI investments will deliver returns." With OpenAI's listing timetable still unclear, SoftBank's financial condition will become the top priority for investors.