SoftBank's Rating Downgraded Due to Rising OpenAI Exposure and Leverage

LootboxPhobia · 2026-03-12T17:28:08+00:00

Jefferies downgraded SoftBank Group to "underperform" with a price target of ¥3,140, citing increased investment risks in OpenAI and intensifying competition in the artificial intelligence sector. SoftBank's financial commitments to OpenAI have raised concerns about valuation transparency and financial flexibility.

LootboxPhobia

2026-03-12 17:28:08

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Investing.com - Jefferies downgraded SoftBank Group’s rating to “Underperform” due to increased risks from the company’s concentrated investments and its growing financial commitments to OpenAI.

The broker set a new target price of ¥3,140, below the post-split adjusted ¥5,118, indicating about 19% downside from the current level.

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SoftBank’s increasing exposure to OpenAI has raised concerns about valuation transparency, competition in the AI sector, and the scale of leverage needed to fulfill commitments.

The company stated that SoftBank has provided most of the funding in multiple rounds of financing for OpenAI, which could inflate reported valuations and thereby increase SoftBank’s net asset value.

There are also related-party transactions between SoftBank and companies within its portfolio. SoftBank pays about $3 billion annually to OpenAI for services in Japan, while approximately $200 million paid to Arm Holdings accounts for about 16% of Arm’s quarterly revenue.

Jefferies also warned that competition in the AI sector is intensifying. The broker mentioned progress from competitors including Google’s Gemini model, Anthropic’s Claude system, and xAI’s Grok. It noted that enterprises are shifting toward Anthropic, while large tech companies are expanding their own models and distribution channels.

The firm also highlighted financial pressures facing OpenAI. It cited reports indicating that OpenAI is expected to lose about $12 billion in Q3 2025, implying an annual cash burn of over $50 billion. According to Jefferies, these losses have prompted OpenAI to explore advertising as a potential revenue source.

Jefferies also expressed concerns about SoftBank’s balance sheet. S&P Global Ratings downgraded the company’s outlook to negative in March 2026, citing the scale of its $30 billion commitment to OpenAI and the resulting pressure on financial flexibility.

However, Jefferies stated that its view could change if OpenAI completes an IPO at a valuation higher than its recent private funding round or if external investors provide significant new capital.

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