SoftBank downgraded on OpenAI exposure and rising leverage

Investing.com -- Jefferies downgraded SoftBank Group to Underperform, citing rising risks tied to the company’s concentrated investments and expanding financial commitments to OpenAI.

The brokerage set a new price target of ¥3140, down from ¥5118 adjusted for a stock split, implying about 19% downside from current levels.

SoftBank’s growing exposure to OpenAI has raised concerns about valuation transparency, competitive pressures in artificial intelligence and the amount of leverage required to fund its commitments.

The firm said SoftBank has supplied the majority of capital in several OpenAI funding rounds, a dynamic it said could inflate reported valuations and, in turn, SoftBank’s net asset value.

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

Jefferies also warned that competition in the artificial intelligence sector is intensifying. It cited advances by rivals including Google’s Gemini models, Anthropic’s Claude system and xAI’s Grok. The brokerage said enterprise adoption is shifting toward Anthropic, while large technology companies are expanding their own models and distribution.

The firm also highlighted pressure on OpenAI’s finances. It cited reports that the company lost about $12 billion in the third quarter of 2025, implying an annualized cash burn exceeding $50 billion. According to Jefferies, those losses have pushed OpenAI toward exploring advertising as a potential revenue source.

Jefferies also flagged balance sheet concerns at SoftBank. S&P Global Ratings revised 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.

Though Jefferies said its view could change if OpenAI completes a public listing at a higher valuation than its most recent private funding rounds or if outside investors provide significant new capital.

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