SoftBank’s AI-Fueled Rally at a Crossroads

Japan’s Nikkei 225 closed above 65,000 for the first time on May 25, 2026, ending the session at 65,158 . The milestone capped a blistering rally powered by global AI euphoria, SoftBank’s parabolic gains, and a sudden wave of geopolitical optimism. But the same forces that lifted the market are now generating some of the most pointed analyst warnings in years. This is the story of how one conglomerate’s enormous bet on OpenAI ignited a record-breaking surge — and why that bet is now at the center of an intensifying debate about concentration risk, unsustainable leverage, and competitive reality in AI.

What pushed the Nikkei past 65,000

Three mutually reinforcing catalysts converged to deliver the historic close.

1. A geopolitical peace dividend

Hopes for a US-Iran agreement to end hostilities and reopen the Strait of Hormuz sent crude oil prices tumbling, boosting risk appetite across Japanese equities . The prospect of lower energy costs for import-dependent Japan and reduced inflationary pressure removed a major macro headwind precisely when tech sentiment was already running hot.

2. An unprecedented semiconductor and AI boom

The Philadelphia Semiconductor Index surged over 2% in the prior New York session, and the momentum carried over directly to Tokyo. Analysts described “explosive buying” as semiconductor equipment and manufacturing names — Advantest, Tokyo Electron, Kioxia Holdings — led a broad rally that coincided with easing Middle East tensions .

3. SoftBank’s parabolic AI-related gains

SoftBank Group’s stock has been the gravitational center of the Nikkei’s run. The shares rocketed over 16% on May 7 as post-Golden Week trading erupted , then delivered a 20% single-day surge on May 21 following reports that OpenAI was preparing for a public listing . Another nearly 12% gain on May 22 extended the move . By then, foreign investors were aggressively buying Tokyo as a primary AI market hub .

Underpinning all of this was a record quarterly profit. SoftBank reported earnings of roughly $12 billion in mid-May — more than triple the year-earlier figure — fueled largely by unrealized gains on its growing OpenAI stake . The numbers gave concrete form to the AI narrative, reinforcing the sense that SoftBank had positioned itself at the center of the most important technology shift in a generation.

The $30 billion question: inside the OpenAI bet

SoftBank’s relationship with OpenAI has evolved from opportunistic investor to defining strategic commitment. The company has led multiple funding rounds and, according to Jefferies research, supplied roughly 85% of OpenAI’s recent capital, inflating the startup’s valuation from $150 billion to $840 billion in the process . A further $30 billion investment is expected during 2026 .

On paper, the bet has been enormously profitable. But the scale of the exposure has led analysts to describe SoftBank as a publicly traded proxy for OpenAI, magnifying concentration risk with every additional dollar committed . Critics note that the spending program is SoftBank’s most ambitious since the $100 billion Vision Funds of 2017 and 2019 .

The numbers are stark. MST Financial analyst David Gibson estimated that SoftBank has committed approximately $113 billion in investments but has funding capacity of only $58.5 billion . The gap raises uncomfortable questions about how much additional debt the group can shoulder before credit metrics deteriorate materially.

Analyst warnings are piling up

While markets have celebrated the AI boom, credit analysts and equity researchers have been issuing increasingly pointed warnings.

S&P cuts credit outlook to negative

In March 2026, S&P Global Ratings revised its credit outlook for SoftBank Group from stable to negative, maintaining a BB+ long-term issuer credit rating. The agency explicitly identified OpenAI as one of SoftBank’s investments with the “weakest” credit quality . S&P warned that the additional $30 billion investment could hurt the group’s liquidity and the credit quality of its assets, noting that SoftBank’s AI investments mostly involve fledgling startups and private companies exposed to significant innovation risk and fierce competition .

Jefferies downgrades to Underperform

Jefferies followed shortly after with a downgrade to Underperform, citing concentrated investment risk, rising leverage, and valuation transparency concerns. The firm flagged that SoftBank’s position as the dominant capital provider in OpenAI’s funding rounds could inflate reported valuations and, by extension, SoftBank’s own net asset value . Related-party payments — an estimated $3 billion per year to OpenAI and $200 million to Arm — create what Jefferies described as a self-reinforcing valuation loop that may not be sustainable .

Competitive reality bites

Perhaps the most fundamental concern is that OpenAI’s competitive position is no longer dominant. Rivals including Anthropic (Claude), Google (Gemini), and well-funded Chinese models have closed the gap rapidly . OpenAI posted a $12 billion loss in Q3 2025 , and the cost to train and run frontier models continues to rise. The once-clear lead that justified eye-watering valuations has eroded, leaving SoftBank’s all-in wager increasingly tied to an AI arms race with no obvious endpoint .

What this means for investors

The Nikkei’s journey past 65,000 is a genuine milestone born of real catalysts: geopolitical relief, a semiconductor super-cycle, and SoftBank’s astonishing AI-linked profit surge. But the same concentration that made the rally possible now represents the market’s most acute downside risk.

If AI sentiment turns, if OpenAI’s next funding round fails to validate its $840 billion valuation at arm’s length, or if credit markets tighten while SoftBank still needs to fund tens of billions in commitments, the unwind could be sharp. The Jefferies downgrade implies roughly 19% downside risk pending OpenAI’s next funding materialization . The market has assigned SoftBank a 6.62 price-to-earnings ratio — suggesting skepticism about the sustainability of inflated net asset values .

For now, the AI trade remains intact. But the analyst chorus is growing louder: what lifted the Nikkei to 65,000 could, under different conditions, pull it back down.