Softbank Drops 40% As Investors Dump AI Bet

By Douglas A. McIntyre Published Nov 26, 9:55AM EST

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Softbank Drops 40% As Investors Dump AI Bet — © Steve Jennings / Getty Images Entertainment via Getty Images

Softbank CEO Masayoshi Son stood next to President Trump, OpenAI CEO Sam Altman, and Oracle (NASDAQ: ORCL) founder Larry Ellison when they announced the Stargate project in January. The plan was to invest $500 billion in data centers. Last month, Son upped its company’s investment in OpenAI to $30 billion. He sold all of Softbank’s Nvidia (NASDAQ: NVDA | NVDA Price Prediction) share ownership for $5.83 billion to help pay for that decision.

The market has soured on Softbank’s “all in” plan for AI infrastructures and AI software. Its stock is down 40% since October. It is hard to find a big-cap stock that, in recent years, has dropped so far so fast. Bloomberg blames the drop mostly on Softbrand’s OpenAI investment.

Softbank faces several huge risks. The first is that it will need to go into debt to fulfill its investment commitments. Debt has become an increasingly significant part of data center construction. While it is likely that a massive number of these will need to be built to support AI use, that is not proven. It is an educated guess.

OpenAI says it will not be profitable until 2028. To grow at the pace it plans, it will need hundreds of billions of dollars in additional investments. Its $500 billion market value would need to rise to do that. If AI adoption slows even modestly, achieving a higher valuation may become impossible.

OpenAI has its first real challenge in Alphabet’s (NASDAQ: GOOG) Gemini 3.0. The press and experts on AI capabilities have, in some cases, found that it is better at some tasks than OpenAI’s GPT-5.1. If so, OpenAI has its first direct competition. Because of the long-term success of Google’s search business and YouTube, Alphabet has access to vast pools of capital.

Softbank may be AI investing’s “canary in a coal mine.” It’s an early warning that AI stocks will be less attractive soon.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.