SoftBank Group priced an $11 billion high-yield bond in September at a record 9.75 percent coupon, the most expensive debt the conglomerate has ever issued, as chief executive Masayoshi Son doubles down on a concentrated artificial intelligence portfolio anchored by OpenAI.
The cost of conviction
The September offering matures in 2034 and carries a yield that dwarfs investment-grade peers, Alphabet sold 10-year paper at 5.2 percent just weeks earlier. SoftBank's credit default swaps have widened 24 percent since June, when the stock peaked at 8,632 yen before shedding 38 percent. The market is pricing the concentration risk that comes with $64.6 billion committed to a single AI venture.
Selling winners to fund the bet
Son previously funded his AI push by exiting positions in Nvidia and T-Mobile US. Now the strategy has shifted: borrow at near-10 percent to hold assets the company expects will appreciate faster than the cost of debt. "We've borrowed money in large part because we don't want to sell assets that we believe will keep rising in value," said Alex Clavel, who runs the Vision Funds. He argues OpenAI's paper gains make the 9.75 percent coupon reasonable.
The roulette analogy
Analysts see a fundamentally different risk profile than Son's earlier diversified bets. "The bets are much bigger than we've ever seen," said Amir Anvarzadeh of Asymmetric Advisors, who holds a short position. David Gibson of MST Financial described the evolution as moving from a spread of numbers on a roulette table to a single red-or-black wager. Marlborough's James Athey said his fund avoids high-yield exposure at this point in the cycle and would not prioritize SoftBank given its aggressive concentration.
Monetization path unclear
Arm's valuation has quintupled since its 2023 listing, offering a template for future exits. But OpenAI's Sam Altman has ruled out a 2026 public offering, citing safety concerns, while competition mounts from Anthropic, hyperscalers and Chinese labs. SoftBank is also preparing to list SB Energy, a data-center operator in which OpenAI holds a stake, potentially seeking a $50 billion valuation. Gibson characterizes the approach as applying lofty multiples to modest revenues while AI enthusiasm peaks.