SoftBank Corp. might launch its U.S. AI cloud business in other countries first

SoftBank Group will unveil its quarterly earnings on Tuesday, as investors scrutinize the company's AI strategy following recent setbacks. The Japanese tech investment firm's substantial $64.6 billion investment in OpenAI's 13% stake has raised concerns about its resilience in the face of AI stock declines. The Democratic Party's strong showing in the US midterm elections has also increased expectations for regulatory scrutiny and delays in data center construction, prompting doubts about AI sector returns.

Rolf Bulk, head of semiconductors and infrastructure at Futurum Group, noted, "The near-term buildout and how exactly everything is going to be financed, whether it can be energized, where it will be deployed, are questions that were much easier to answer six months ago than today." SoftBank's AI investments span across model developers, data center infrastructure, semiconductors, and robotics.

The company has taken on substantial debt at high interest rates; as of June, its net interest-bearing debt totaled 10.8 trillion yen ($68 billion), up from 6.6 trillion yen a year earlier. Concerns about the AI sector contributed to SoftBank's shares falling 11% on Friday, while debt insurance costs reached a four-year high. AI-related shares fell 4.2% on Monday and are down 23% year-to-date.

Analysts' forecasts for SoftBank's July-September net profit range from a potential gain of 233 billion yen ($1.5 billion) to a loss of 113 billion yen. Investors are also assessing SoftBank's ability to secure further debt financing, given the decline in collateral values for its largest holdings, such as chip designer Arm, which has fallen around 60% since June.

SoftBank may be forced to de-leverage and sell off positions, according to Futurum's Bulk. Additionally, investors await potential comments on SoftBank's response to China's rejection of its $5.4 billion takeover bid for ABB's robotics division, as both companies explore solutions and engage with Chinese authorities.