Softbank Drops 40% As Investors Dump AI Bet

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Softbank CEO Masayoshi Son stood next to President Trump, OpenAI CEO Sam Altman, and Oracle (NASDAQ: ORCL) founder Larry Ellison when they announced the Stargate project in January. The plan was to invest $500 billion in data centers. Last month, Son upped its company’s investment in OpenAI to $30 billion. He sold all of Softbank’s Nvidia (NASDAQ: NVDA) share ownership for $5.83 billion to help pay for that decision.

Quick Read

• Softbank Is One Of The Most Important AI Plays

• If Things Go Wrong At Softbank, AI Is In Trouble

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The market has soured on Softbank's “all in” plan for AI infrastructures and AI software. Its stock is down 40% since October. It is hard to find a big-cap stock that, in recent years, has dropped so far so fast. Bloomberg blames the drop mostly on Softbrand's OpenAI investment.

Softbank faces several huge risks. The first is that it will need to go into debt to fulfill its investment commitments. Debt has become an increasingly significant part of data center construction. While it is likely that a massive number of these will need to be built to support AI use, that is not proven. It is an educated guess.

OpenAI says it will not be profitable until 2028. To grow at the pace it plans, it will need hundreds of billions of dollars in additional investments. Its $500 billion market value would need to rise to do that. If AI adoption slows even modestly, achieving a higher valuation may become impossible.

OpenAI has its first real challenge in Alphabet’s (NASDAQ: GOOG) Gemini 3.0. The press and experts on AI capabilities have, in some cases, found that it is better at some tasks than OpenAI’s GPT-5.1. If so, OpenAI has its first direct competition. Because of the long-term success of Google’s search business and YouTube, Alphabet has access to vast pools of capital.

Softbank may be AI investing’s “canary in a coal mine.” It's an early warning that AI stocks will be less attractive soon.

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