SoftBank faces financing concerns and execution risks in AI expansion

SoftBank Group is facing increased scrutiny regarding the sustainability of its artificial intelligence investment strategy. Rising financing costs and credit risks have impacted investor confidence, with premiums for five-year credit default swaps on SoftBank rising to 432 basis points, a level near its highest in four years.

Beyond financing, the company faces significant execution risks related to its infrastructure projects. A planned data center campus in Ohio for OpenAI, intended to provide 10 gigawatts of power, relies on a 9.2 gigawatt gas power plant that SB Energy neither owns nor operates.

Contractual obligations for the OpenAI project include penalties for delays: OpenAI is entitled to one free rental day for every day of delay up to 90 days, increasing to two free days per day of delay thereafter. A one-year delay could result in 640 free rental days, potentially impacting future rental income. While these obligations fall on SB Energy rather than SoftBank Group directly, the project's success remains a critical test for the company's broader AI ambitions.