SoftBank Shares Drop After Oracle Warning Raises AI Funding Concerns

TLDR

• SoftBank Group shares fell 3.1% to 6,154.0 yen on Friday after an Oracle warning about a data-center project.
• Oracle sent a force-majeure notice over possible power delays at Project Jupiter, part of the $500 billion Stargate initiative.
• SoftBank raised $11.1 billion this week through bond sales to help fund its AI investments, including OpenAI.
• Interest rates on the new bonds ranged from 7.125% to 9.75%, much higher than SoftBank’s 2021 debt sale.
• Credit spreads on AI-related bonds have widened, showing investors are growing more careful about AI debt.

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SoftBank Group shares dropped on Friday after news from Oracle raised new questions about AI infrastructure funding. The stock fell 3.1% to 6,154.0 yen following a Bloomberg report about Oracle’s actions on a major data-center project.

SoftBank Group Corp., SFTBY

Oracle sent a force-majeure notice to a Blue Owl unit working on Project Jupiter. This is a large data-center campus in New Mexico that is part of Stargate, a $500 billion AI infrastructure plan involving Oracle, OpenAI and SoftBank Group.

What Triggered the Oracle Warning

Oracle issued the notice because of possible delays in securing power for the project. Sources familiar with the matter told Reuters and Bloomberg that Oracle wants to protect itself from payment obligations if the project is not finished on time.

The project was originally planned to come online in 2028. Power, construction and financing issues are now raising doubts about whether that timeline can be met.

This situation has led to broader questions about whether large amounts of money committed to AI infrastructure can actually be spent on schedule. Companies across the industry are facing similar constraints.

The timing matters for SoftBank because the company has been taking on more debt to fund its AI strategy. This week, SoftBank raised $11.1 billion through bond sales in dollars and euros.

Part of that money is meant to help fund SoftBank’s investment in OpenAI. The company has already committed $64.6 billion to OpenAI and expects to own about 13% of the ChatGPT maker soon.

SoftBank’s Growing Debt Costs

The bond sale was the largest high-yield corporate bond sale in the world. It surpassed a $10.9 billion deal from French telecom company Numericable back in 2014.

SoftBank sold $10 billion in dollar-denominated notes across three maturities. Interest rates on these notes ranged from 8.625% to 9.75%.

It also sold 1 billion euros in notes, with yields between 7.125% and 8%. These rates are much higher than SoftBank’s 2021 bond sale, when yields ranged from just 2.125% to 5.25%.

SoftBank has now raised $14.6 billion through high-yield bonds this year alone. That accounts for 63.4% of the entire Asia-Pacific and Japan high-yield corporate bond market, according to Reuters.

The company is also spending heavily elsewhere. SoftBank is acquiring ABB’s robotics business for $5.4 billion and DigitalBridge for $3.1 billion.

Credit investors appear to be getting more selective about AI-related debt. Reuters reported that spreads on AI-linked bonds widened to about 115 basis points, compared to 78 basis points for the broader market.

Hyperscaler debt issuance is expected to rise sharply as companies work to finance data centers and chips. This adds more pressure to an already competitive lending market.

SoftBank’s exposure to AI infrastructure also runs through SB Energy, which is preparing for a possible U.S. stock listing. The company has a $430 billion data-center backlog, though much of that capacity is concentrated among SoftBank and OpenAI and is long-dated.

Planned IPOs for both OpenAI and SB Energy have been delayed. This removes another potential source of funding for SoftBank at a time when borrowing costs are climbing.

The next question is how SoftBank will fund its remaining AI commitments going forward. Whether asset sales or future IPOs can provide extra capital remains to be seen.