Key Takeaways
- • SoftBank Group reports July-September quarterly earnings on Tuesday, with investors scrutinizing its AI strategy amid a rout in AI stocks.
- • SoftBank has spent $64.6 billion on a 13% stake in OpenAI, and its exposure to AI model developers, data centres, semiconductors and robotics is central to the market's concern.
- • Net interest-bearing debt reached 10.8 trillion yen ($68 billion) at the end of June, up from 6.6 trillion yen a year earlier.
- • SoftBank shares fell 11% on Friday and 4.2% on Monday, are down 23% year to date, and its debt default insurance cost hit a four-year high.
- • China blocked SoftBank's $5.4 billion takeover of ABB's robotics unit, and the companies are weighing whether to carve out the China business.
Summary
SoftBank Group is set to report quarterly earnings on Tuesday, with investors seeking reassurance on its artificial intelligence strategy after a sharp selloff in AI-linked stocks. The Japanese technology investment firm has made large bets on AI, most notably the $64.6 billion it has committed to acquiring a 13% stake in OpenAI, raising questions about its ability to withstand setbacks in the sector, according to Reuters.
Sentiment has been further weighed by the Democratic Party's sweeping success in US midterm elections, which has heightened expectations of regulatory scrutiny and delays to data centre construction. Rolf Bulk, head of semiconductors and infrastructure at Futurum Group, said the questions around the near-term buildout and its financing, energy supply and deployment were far easier to answer six months ago.
SoftBank's balance sheet is a key focus. Net interest-bearing debt stood at 10.8 trillion yen ($68 billion) at the end of June, compared with 6.6 trillion yen a year earlier, and the company has borrowed at high yields. Its shares fell 11% on Friday and 4.2% on Monday, and are down 23% year to date. The cost of insuring its debt against default reached a four-year high. Arm, a major holding that serves as loan collateral, traded at $175 on Friday, roughly 60% below its June record high, which Jefferies analyst Atul Goyal has flagged as adding pressure to SoftBank's finances.
Analysts polled by LSEG forecast July-September net profit ranging from a gain of 233 billion yen ($1.5 billion) to a loss of 113 billion yen, underscoring how difficult the results are to predict. Investors will look to CFO Yoshimitsu Goto's briefing for guidance on further debt-based financing and whether SoftBank may adopt a more defensive posture. Futurum's Bulk said SoftBank "may find itself in a position where they have to stop investing, de-lever and even sell down some of their positions."
SoftBank is also dealing with China's block of its $5.4 billion takeover of ABB's robotics division. According to a person familiar with the matter, the companies are in talks with Chinese authorities and remain optimistic about finding a solution, while Bloomberg News has reported that they are weighing whether to carve out the China business.
Sentiment has been further weighed by the Democratic Party's sweeping success in US midterm elections, which has heightened expectations of regulatory scrutiny and delays to data centre construction. Rolf Bulk, head of semiconductors and infrastructure at Futurum Group, said the questions around the near-term buildout and its financing, energy supply and deployment were far easier to answer six months ago.
SoftBank's balance sheet is a key focus. Net interest-bearing debt stood at 10.8 trillion yen ($68 billion) at the end of June, compared with 6.6 trillion yen a year earlier, and the company has borrowed at high yields. Its shares fell 11% on Friday and 4.2% on Monday, and are down 23% year to date. The cost of insuring its debt against default reached a four-year high. Arm, a major holding that serves as loan collateral, traded at $175 on Friday, roughly 60% below its June record high, which Jefferies analyst Atul Goyal has flagged as adding pressure to SoftBank's finances.
Analysts polled by LSEG forecast July-September net profit ranging from a gain of 233 billion yen ($1.5 billion) to a loss of 113 billion yen, underscoring how difficult the results are to predict. Investors will look to CFO Yoshimitsu Goto's briefing for guidance on further debt-based financing and whether SoftBank may adopt a more defensive posture. Futurum's Bulk said SoftBank "may find itself in a position where they have to stop investing, de-lever and even sell down some of their positions."
SoftBank is also dealing with China's block of its $5.4 billion takeover of ABB's robotics division. According to a person familiar with the matter, the companies are in talks with Chinese authorities and remain optimistic about finding a solution, while Bloomberg News has reported that they are weighing whether to carve out the China business.
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