Intel Corporation surges, "taking along" SoftBank (SFTBY.US)! Q1 net profit far exceeds expectations, while the ability to finance during the AI gamble remains a long-term challenge.

Thanks to the boost from a rise in chip stocks, SoftBank (SFTBY.US) significantly outperformed market expectations in its earnings performance for the first quarter of fiscal year 2026. The financial report shows that for the first quarter ending June 30, SoftBank achieved net sales of 2.02 trillion yen, an 11% year-on-year increase; meanwhile, net profit attributable to shareholders was 347.33 billion yen, which, despite a year-on-year decline of 18%, far exceeded analysts' average expectations of 166 billion yen. In the financial report, SoftBank noted that it achieved investment income of 1.86 trillion yen in the first quarter, primarily from its holdings in chip manufacturer Intel Corporation (INTC.US). This investment contributed 1.33 trillion yen (approximately 8.5 billion USD) in gainsdata shows that the share price of Intel Corporation increased more than twofold in the three months ending June 30. This portion of earnings helped offset the impact of limited valuation growth at OpenAI, in which SoftBank has heavily invested, as well as declines in certain assets within the Vision Fund investment portfolio (including a recent drop in the share price of PayPay, a payment application company under SoftBank). Data shows that the Vision Fund's investment income was 460.06 billion yen, a 30% year-on-year decrease. Behind the AI gamble, financing capability remains a long-term challenge. Beyond financial metrics, the market is more concerned about SoftBank's high-stakes bet in the artificial intelligence (AI) sector. As the scale of AI investments continues to expand, how SoftBank can maintain its capital investment capability remains a focal point for the market. SoftBank founder Masayoshi Son has fully directed the companys investment power into the AI field, hoping to achieve returns through long-term investments. However, this has simultaneously increased the companys balance sheet leverage, exposing its investment portfolio to the extreme volatility of AI transactions. In June of this year, driven by a surge in market sentiment towards AI investments, SoftBank briefly became the most valuable company on the Tokyo Stock Exchange. However, subsequent news about the potential delay of OpenAI's IPO plans, along with investor concerns over whether substantial corporate AI expenditures would yield reasonable returns, led to a decline in SoftBank's stock price, which has so far erased half of its gains for the year. Among SoftBank's numerous AI investments, the most eye-catching is its substantial bet on OpenAI. Currently, SoftBank's total investment in OpenAI is expected to approach 65 billion USD before October. To support related expenditures, SoftBank has signed a one-year, 40 billion USD bridge loan and arranged a 20 billion USD guaranteed financing secured against shares of chip design company Arm (ARM.US). Aside from the investment in OpenAI, SoftBank also plans to invest 5.4 billion USD to acquire the Siasun Robot & Automation business under ABB, and 3.1 billion USD to acquire digital infrastructure investment firm DigitalBridge. However, reports indicate that SoftBank's attempts to further raise new loans by using its holdings in OpenAI as collateral have encountered obstacles, as lenders are becoming increasingly cautious about accepting equity in unlisted companies as collateral. S&P Global, Inc. rating analyst Makiko Yoshimura stated, We believe Arm has a robust credit position, but OpenAI is very fragile. It is a startup facing significant AI innovation risks and extremely intense competition. BTIG analyst Jesse Sobelson wrote in a report prior to SoftBank's earnings release on Thursday, Discussions surrounding the value of cutting-edge AI models are heating up, and financing issues related to OpenAI remain unresolved. A major variable in the debt risks SoftBank faces to fulfill its AI investment commitments is OpenAI itself. The timing of its initial public offering and its valuation are now facing scrutiny from the capital markets and significant challenges from competitors. On one hand, there are reports that OpenAI is seeking an IPO valuation of up to 1 trillion USD, a significant increase from the previous valuation of 852 billion USD; however, media revealed that its listing plans may have been postponed until next year. On the other hand, competitors from China are offering AI models with similar performance at lower costs, which could spark a price war, thereby compressing profit margins for cutting-edge developers like OpenAI and impacting the demand for chips that provide computational power. Consequently, the market is closely monitoring how SoftBank will finance its ongoing investments in AI, which will become a significant test for the company, especially as it faces 30 billion USD in debt maturing in the second half of the year and increasingly relies on stock-backed loans. The AI industry is still in a phase of rapid investment, with capital expenditures in infrastructure such as data centers, electricity, and chips continually expanding. For SoftBank, the future challenge lies in how to convert asset value growth into stable cash flow.