"OpenAI Must Succeed"... Japan's SoftBank Surges 60% in Four Trading Days [Mwonilissu]

OpenAI and Arm Drive Stock Price Surge
Concerns Mount Over Bridge Loans and Subordinated Bonds Used to Raise Capital

The undisputed highlight of this week in the Japanese stock market has been SoftBank Group. SoftBank's share price surged by more than 58% over four trading days, from Thursday the 21st to the 26th. At the beginning of the week, the stock hit an all-time high on a split-adjusted basis since its initial listing. Its market capitalization has been closing in on Toyota Motor Corporation, the top-ranked company in Japan, attracting intense media attention in Japan.

However, concerns about the rapid short-term surge have quickly emerged. The steeply rising share price began to tumble by over 5% later in the week, demonstrating volatility. As a result, there is a mix of both positive assessments and worries regarding the investment strategy of Masayoshi Son, Chairman of SoftBank. Will Chairman Son's strategy succeed? This week, we examine the factors behind SoftBank's stock price surge.

The background of SoftBank's soaring share price lies in growing expectations for its investment in OpenAI. Recently, international media outlets, including The Wall Street Journal (WSJ), reported that OpenAI is proceeding with steps to go public as early as the second half of this year. SoftBank is a core investor in OpenAI.

Last year, SoftBank invested 30 billion dollars (44.961 trillion won), and this year, it has decided to inject an additional 30 billion dollars into OpenAI. The cumulative investment amount has already surpassed 60 billion dollars (89.91 trillion won). In effect, OpenAI has become the key investment that will determine SoftBank's future.

If OpenAI succeeds in going public, there is a high likelihood that SoftBank's stake will also be revalued. This is the primary reason behind SoftBank's stock price surge this week.

Expectations for the performance of previous investments have also grown. SoftBank holds about 90% of the shares in Arm, the UK-based semiconductor design company. Following NVIDIA's recent earnings announcement, anticipation for AI semiconductor demand has risen, and Arm's share price has also climbed significantly. Reflecting Arm's share price increase, Japan's SMBC Nikko Securities sharply raised SoftBank's target price from 5,200 yen (49,162 won) to 8,500 yen (80,362 won).

Ultimately, this week's surge in SoftBank's stock price appears to be the result of both growing anticipation over OpenAI's potential IPO and the rising share price of Arm, another of its major investments. As a result, SoftBank's market capitalization at one point swelled to about 45 trillion yen (425.448 trillion won). The gap with Toyota Motor Corporation, the market cap leader, narrowed to around 2 trillion yen (18.909 trillion won). Some analyses even suggest that, when excluding treasury shares, SoftBank's market capitalization has already surpassed that of Toyota.

However, as the subsequent sharp decline in the stock price shows, the outlook is not all rosy. On the 28th, when Arm's share price dropped, SoftBank's share price also fell by more than 5% during the day, highlighting high volatility. Effectively, SoftBank is now seen as a theme stock that is strongly influenced by developments in AI and semiconductor companies.

In addition, there are concerns that SoftBank's large-scale investment in OpenAI could significantly increase its financial burden. Ever since SoftBank made a massive capital injection into OpenAI, international media outlets such as Bloomberg have consistently expressed concerns regarding Chairman Son's aggressive investment strategy.

In March, SoftBank raised a 40 billion dollar (60.416 trillion won) bridge loan—a short-term loan used when immediate funding is needed—for its OpenAI investment. Then in April, it issued 418 billion yen (3.952 trillion won) in subordinated bonds. According to the Nihon Keizai Shimbun (Nikkei), SoftBank plans to issue an additional 260 billion yen (2.458 trillion won) in subordinated bonds to individual investors next month.

This means that SoftBank's borrowing and bond issuance to raise funds are steadily increasing. If OpenAI's IPO is delayed, or if concerns over an 'AI bubble'—a theory raised by some—dampen investor sentiment, SoftBank, which has been borrowing extensively, could face significant financial stress. Given that Chairman Son previously suffered losses of nearly 18 trillion won from investments in WeWork, there are both high expectations and serious concerns over his current strategy.

Will Chairman Son's 'big bet' pay off? The market and the media are closely watching to see whether the strategy of 'SoftBank rises only if OpenAI succeeds' will prove to be a masterstroke or a critical misstep.

This content was produced with the assistance of AI translation services.