SoftBank Credit Risk Spread Jumps 22 Basis Points to 466 on November 6
Key Facts
The five-year credit default swap spread on SoftBank widened 22 basis points to 466 basis points on Friday, November 6, its widest level since October 2022, according to Markit data cited by Reuters. The widening reflects a higher cost of protection against the group's default in the credit market. The move came amid a broad selloff in AI-related stocks on Wall Street, followed by losses in Asian markets, the Associated Press reported. At the same time, SoftBank's U.S.-listed depositary receipt fell to $11.17 at the November 5 close, from $13.05 in the previous session, according to EL7 data. These developments put the group's large AI bets at the center of investors' monitoring of credit and market risks.
The selloff extended to U.S. indexes in Thursday's, November 5, session: the Nasdaq Composite fell 5.5%, the S&P 500 dropped 4.4% in its worst day since market turmoil linked to the "Liberation Day" tariffs in April 2025. The Dow Jones Industrial Average also fell 1,833 points, or 3.4%, in the same session, according to the Associated Press. The agency said Asian stocks declined after the broad selloff in AI stocks on Wall Street. Those losses provide market context that coincided with SoftBank's spread widening, but do not by themselves establish the cause of the move. The group had previously seen its spread widen on October 15, when it rose 24 basis points to 424 basis points, according to Reuters.
SoftBank is seen as a gauge of the outlook for AI investment because of its $64.6 billion investment in OpenAI and its 90% stake in chip designer Arm, according to Reuters. The group completed the third and final tranche of its follow-on investment in OpenAI on October 1, worth $10.0 billion, bringing its total investment to $64.6 billion and its stake to about 13%, according to the company's announcement. These figures link SoftBank's balance sheet to the performance of its investments in the sector, at a time when the market is focused on companies' ability to finance AI projects. Reuters said the group had accumulated debt at record yields to fund its stake in OpenAI. It also pointed to delayed investment-return prospects after OpenAI postponed its public offering to 2027.
In a financing move, SoftBank raised $11.1 billion on September 24 from dollar- and euro-denominated bonds, in what Reuters described as the largest recorded global issuance of high-yield corporate bonds, to fund its OpenAI bet. The issuance is part of a broader picture of the funding needs for the group's AI investments, as investors track borrowing costs and the prospects for recovering invested capital. On October 15, the five-year credit default swap spread had widened to 424 basis points before rising again to 466 basis points on November 6. The comparison shows the spread's increase between the two dates, with different moves recorded in each session. The available figures do not detail the effect of each issuance or investment on credit risk.
Concerns about investment in AI infrastructure coincided with worries about rising borrowing costs. The Associated Press pointed to the possibility that financing costs could slow construction of AI data centers and to criticism that sector stock prices had risen too far. Reuters also said the U.S. midterm election results raised concerns about a slowdown in infrastructure construction, and cited an analyst's estimate that one-third of U.S. data center capacity was at risk. The Associated Press said Democrats' election victory increased the likelihood that governments would impose a pause or restrictions on the construction of new data centers. These political and financing factors add to the debate over the pace of data center construction and demand for capital. Reuters linked the delayed expected return on SoftBank's investment in OpenAI to the company's postponement of its public offering to 2027.
Attention now turns to SoftBank's second-quarter fiscal 2026 results, scheduled for presentation on November 10, covering the six months ended September 30. The company said the financial report is scheduled to be made available at 3:30 p.m. Japan time, before the results presentation at 4:30 p.m. the same day. The disclosure schedule will allow investors to review the period's figures before the presentation, as credit spreads have widened and the group's U.S. depositary receipts have fallen. The results will be the first dated corporate milestone in the available information after the spread move on November 6. The presentation schedule did not include advance estimates of the results or guidance on investment performance.