On Friday, shares of Japan’s SoftBank Group continued to decline, mirroring a wider downturn in AI-related stocks as investors grew cautious of the sector’s inflated valuations.
The conglomerate, which maintains a diverse portfolio of AI investments spanning infrastructure, semiconductors, and applications, experienced a decline of over 8% in its shares.
This follows a nearly 3% gain in the prior session, after falling 10% on Wednesday, marking its worst day since April. It faces a market capitalization loss of approximately $53 billion this week, which would represent its steepest weekly decline since March 2020, if losses on Friday persist.
“The decline in SoftBank Group’s shares is largely due to many treating it as the singular listed option for OpenAI,” explained David Gibson, senior research analyst at MST Financial.
The retreat signifies increasing caution towards the AI sector and a recognition that many of OpenAI’s collaborations remain possibilities rather than certainties, with financing opportunities still in question, he told CNBC.
Reportedly, OpenAI CEO Sam Altman mentioned that the company has engaged with the U.S. government regarding potential federal loan guarantees aimed at facilitating chip factory construction. This came after OpenAI’s CFO indicated that the organization seeks federal assistance for securing funding for chips.
SoftBank possesses a controlling interest in U.K.-based semiconductor firm Arm Holdings, whose chips are essential for powering mobile devices and AI processors globally. Shares of Nasdaq-listed Arm dropped by 1.21% overnight.
Additionally, Bloomberg recently reported, citing informed sources, that the conglomerate had contemplated acquiring U.S. chipmaker Marvell Technology Inc. earlier this year.
Wider Decline
Other technology stocks in Japan also faced declines. Semiconductor testing equipment manufacturer Advantest fell over 6%, chipmaker Renesas Electronics was down nearly 4%, and Tokyo Electron, a maker of chip production equipment, decreased by 1.46%.
The share price of the world’s largest chipmaker, TSMC, fell by 0.6%.
Nvidia supplier SK Hynix experienced a drop of more than 1%, while South Korean competitor and memory chipmaker Samsung fell 0.5%.
The downturn in Asian tech stocks coincided with a decline in AI-related companies in the U.S. overnight.
Qualcomm dropped by nearly 4%, despite reporting strong quarterly results, after announcing it might lose future Apple contracts. AMD, which had performed well on Wednesday, declined by 7%, while Palantir and Oracle fell by about 7% and 3%, respectively. Nvidia and Meta Platforms also closed lower.
The enthusiasm surrounding AI has spurred concerns that the market might be entering a tech bubble. Some analysts contend that the valuations of AI firms are beginning to resemble the late 1990s dot-com bubble, marked by stock prices escalating beyond realistic profitability estimates.
The undeniable economic influence of artificial intelligence and the inevitability of market fluctuations were noted by Laura Cooper, global investment strategist at Nuveen.
“However, it’s premature to declare a bubble. Current AI capital expenditures are primarily funded by financially robust companies with solid balance sheets, rather than through cheap credit or speculation,” she stated. “The larger concern is not about a bubble bursting but rather valuation fatigue — investors growing weary of paying increasingly exorbitant premiums for AI returns that don’t manifest rapidly enough.”
