SoftBank’s AI Ambitions Face Market Scrutiny Amid Share Price Decline

SoftBank JP3436100006

Despite ambitious plans to become a powerhouse in artificial intelligence and energy infrastructure, SoftBank Group's shares have encountered significant selling pressure in recent months. This downturn follows a robust performance in 2025 and is attributed to a reassessment of its stake in Arm Holdings and persistent questions regarding the sustainability of its earnings.

The stock's recent trajectory stands in stark contrast to its longer-term performance. While SoftBank shares have delivered a one-year total return of 77.34%, they have surrendered a substantial portion of their 2025 advances. Currently trading near 4,010 yen, the equity is in a clear downtrend.

The recent performance metrics illustrate the shift:
* One-day change: Approximately -1%
* One-month performance: Roughly -4%
* Three-month decline: About -30%
* Year-to-date loss: -13.11%

Prior to this correction, the stock had reached a pre-split adjusted high of around 22,255 yen in November 2025.

Arm Holdings Downgrade Adds to Headwinds

Market sentiment received a further blow from a rating change for Arm Holdings, SoftBank's most valuable publicly traded holding. BofA Securities downgraded Arm from "Buy" to "Neutral," simultaneously reducing its price target from $145 to $120. Analyst Vivek Arya cited near-term challenges in the smartphone sector that could pressure Arm's licensing revenue ahead of its Q3 FY2026 results.

This downgrade highlights that one of SoftBank's core assets is facing short-term uncertainty. However, it does not alter the immediate catalyst for SoftBank: the upcoming release of its own Q3 FY2026 financial figures on February 12.

Strategic Pivot Continues Unabated

Even as its share price weakens, SoftBank is aggressively executing a strategic shift. The company is channeling substantial capital into AI and energy infrastructure projects, including several major recent commitments:

• SB Energy Investment: OpenAI and SoftBank are each investing $500 million into SB Energy, a joint venture aimed at expanding data center and energy infrastructure for the "Stargate" project.
• Texas Data Center: SB Energy will construct and operate a massive 1.2-gigawatt data center in Milam County, Texas, for OpenAI.
• DigitalBridge Acquisition: Plans are underway to acquire DigitalBridge for $4 billion to scale next-generation AI infrastructure capabilities.
• OpenAI Funding: A further $22.5 billion investment commitment to OpenAI was finalized in late December 2025.

The Stargate initiative itself is a multi-year project valued at approximately $500 billion, designed to build a global network of AI data centers. It was first announced with political support in the United States in January 2025.

Stock Split Lowers Barrier to Entry

In a move to improve retail investor accessibility, SoftBank executed a 4-for-1 stock split effective January 1, 2026. This action significantly reduced the nominal share price while leaving the company's total market capitalization unchanged. Before the split, the minimum trading lot of 100 shares exceeded 2.2 million yen, a prohibitive hurdle for many individual investors.

Concerns Over Earnings Composition

Beneath the prominent AI narrative, fundamental concerns about the quality of SoftBank's earnings persist. For the first half of the fiscal year ending September 2025, the group reported a net profit of approximately 2.9 trillion yen—a staggering 191% year-over-year increase. However, a large portion of this growth was driven by valuation gains within its investment portfolio rather than recurring operational income.

The extreme divergence in analyst valuations underscores the challenge of appraising such a complex investment holding company. Estimates for the stock's fair value range from 342 yen to 22,781 yen per share, reflecting the difficulty in reliably assessing a conglomerate with volatile technology investments.

February Earnings as the Next Catalyst

All eyes are now on February 12, when SoftBank reports its Q3 FY2026 results. The report will serve as a critical test, with investors likely focusing on three key areas: the progress in reallocating and reinvesting capital, improvements in balance sheet strength, and tangible updates on the numerous AI and infrastructure commitments. The market's interpretation of these factors will likely determine whether the current share price correction is a temporary setback or a sign of deeper challenges for the SoftBank story.