SoftBank credit risk jumps to 4-year high as AI fears roil market

The cost of insuring against a default for tech investor SoftBank Group rose to its highest level in four years on Friday. According to Markit data reported by Business Recorder, the 5-year credit default swap spread for the company increased by 22 basis points to 466 bps, marking its widest spread since October 2022. Economic Times Tech also noted that this jump occurred as concerns regarding AI profitability impacted global financial markets.

SoftBank is considered a bellwether for AI investment prospects due to its 90% stake in chip designer Arm and a $64.6 billion investment in OpenAI. Business Recorder reports that investors have increased scrutiny of SoftBank's finances following the company's acquisition of debt at record yields to fund its OpenAI stake. This scrutiny comes as the potential for a return on investment has been delayed by OpenAI's decision to push its public offering to 2027.

Additionally, Business Recorder states that recent US midterm election results have sparked fears of a slowdown in AI infrastructure development. Rolf Bulk of the Futurum Group wrote in a research report that these election results could put one-third of US data centre capacity at risk, as planned facilities are located in states where governors may slow development.

Brief written by urgent.news from Economic Times Tech, Business Recorder — 2 reports on this story. Machine-written — may contain errors; check the original before relying on it.