SoftBank’s $30 Billion Investment in OpenAI Leads to S&P Credit Outlook Downgrade

S&P Global Revises SoftBank's Outlook to Negative Amid Increased OpenAI Investment

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S&P Global has shifted its perspective on SoftBank Group Corp., moving its outlook from stable to negative. The agency cited concerns that SoftBank’s plan to inject an additional $30 billion into OpenAI could strain the company’s liquidity and diminish the creditworthiness of its assets.

This change comes after SoftBank’s recent decision to further expand its investment in OpenAI, following previous contributions exceeding $30 billion and ongoing support for other AI initiatives. Despite these moves, S&P maintained SoftBank’s long-term issuer credit rating at “BB+,” noting that the company could offset financial risks by liquidating certain holdings.

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According to S&P, SoftBank’s AI investments, including those in OpenAI, are largely concentrated in early-stage and private companies that face considerable risks from rapid technological change and intense competition. The agency identified OpenAI as one of the company’s riskiest assets in terms of credit quality.

A SoftBank spokesperson welcomed S&P’s decision to maintain its long-term rating, highlighting the company’s proven ability to manage its finances under pressure. In the previous year, SoftBank sold stakes in companies like T-Mobile US Inc. and Nvidia Corp. to support founder Masayoshi Son’s ambitious AI investments.

SoftBank's Growing Stake in OpenAI

The new $30 billion investment in OpenAI will be distributed in three installments of $10 billion each throughout the year. This will increase SoftBank’s ownership in the American AI firm from about 11% in December to 13%. S&P noted that OpenAI’s share within SoftBank’s portfolio will soon rival that of Arm Holdings Plc, a UK-based chip designer, and that the proportion of unlisted assets in the portfolio is expected to rise from 42% to over 50%.

S&P warned that as OpenAI becomes a larger part of SoftBank’s holdings, the overall liquidity of the portfolio will decline. While SoftBank has the option to sell listed assets to reduce financial pressure, the timing of such sales remains uncertain. The agency cautioned that if SoftBank does not act quickly to ease its financial burden, such as by selling assets, its credit rating could come under further strain.

Insights from Bloomberg Intelligence

Bloomberg Intelligence pointed out that S&P’s decision to assign a negative outlook—rather than placing SoftBank on CreditWatch—gives the company time to protect its BB+ rating by reducing its loan-to-value (LTV) ratio below 35% through asset sales. An initial public offering of OpenAI could also help improve liquidity. However, the report noted that achieving these goals may be difficult due to increased geopolitical risks and the possibility of an AI market bubble, both of which could depress technology valuations and delay OpenAI’s potential IPO.

Further Analysis and Commentary

According to S&P, the additional investment in OpenAI could also negatively impact SoftBank’s LTV ratio, a key metric the company uses to demonstrate its ability to service debt. The agency said it would consider upgrading its outlook if SoftBank’s portfolio liquidity improves through IPOs of assets like OpenAI, while also maintaining asset quality and reducing the LTV ratio through further sales.

Reporting by Sharon Chen, Credit Analyst. With additional contributions from Edwin Chan.

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