SoftBank Group Corp.'s credit default swaps (CDS) hit an 11-month high, trading at 355 basis points—the widest among Japanese corporates—after S&P Global Ratings downgraded its outlook to negative from stable. The move followed a $30 billion additional investment in OpenAI, which S&P cited as straining SoftBank’s credit profile. The rating agency warned that prolonged liquidity challenges and weak portfolio quality could trigger a downgrade of its BB+ rating, raising funding costs for the conglomerate.

S&P highlighted OpenAI as one of SoftBank’s riskiest investments, noting its exposure to innovation risks and fierce competition in the AI sector. Bloomberg Intelligence analyst Sharon Chen estimated SoftBank’s loan-to-value (LTV) ratio might exceed its 25% self-imposed limit, reaching 27%-28%, complicating asset liquidity. While an OpenAI IPO could alleviate pressures, Chen warned of geopolitical delays affecting its timing.

S&P emphasized that SoftBank’s AI-focused bets, including OpenAI, face intense market competition, jeopardizing their creditworthiness. The firm’s broader portfolio, heavily reliant on tech ventures, remains vulnerable to sector-specific downturns. Regulators and investors are closely monitoring how SoftBank balances its aggressive AI bets with portfolio diversification needs.

A downgrade could trigger ripple effects across SoftBank’s stakeholders, from lenders to shareholders. The situation underscores the risks of over-concentration in high-growth, high-risk sectors like AI. As S&P noted, resolving these challenges will require strategic asset sales or liquidity injections, but the path remains unclear.