Investors in SoftBank Group shares are temporarily setting aside concerns about the Japanese conglomerate's rising financing costs, focusing instead on the potential returns from its artificial intelligence bets.

OpenAI's new model GPT-6 Astra has reignited market confidence, with investors bullish on Masayoshi Son's $65 billion commitment to the ChatGPT developer, and SoftBank shares posting their first monthly gain in four months in September.

Thanks to OpenAI's latest $30 billion funding round (at a $1.4 trillion valuation), the stock rose 24% over four weeks.

A rebound in chip subsidiary Arm's share price has also boosted market confidence, with investors believing the tech investment group has the ability to repay its mounting debt.

At the same time, persistent market concerns over AI safety, soaring costs, and industry competition have pushed SoftBank's credit default swap (CDS) prices to their highest level since 2023.

The divergence between SoftBank's CDS and its stock performance contrasts with the share price decline of Oracle, which invoked force majeure clauses to avoid surging data center costs.

David Dai, managing director at Santander Bernstein in Hong Kong, said of SoftBank: "From an equity investment perspective, we don't pay excessive attention to the technical details of its financing. As long as the company can complete its fundraising, the equity story is quite compelling. SoftBank holds a stake in Arm, and Arm is the biggest beneficiary of growing demand for agentic AI and server CPUs."

Arm and other chipmakers forecast that by 2030, market demand for central processing units could reach hundreds of billions of dollars.

Users of services like Meta Platforms' Muse are increasingly having AI agents write code and operate web browsers, driving continued growth in general-purpose computing orders.

Dai estimates the market could be worth up to $330 billion, and he says Arm's order outlook is equally promising.

After nearly halving from its June high, Arm's share price has now stabilized and rebounded, gaining about 20% last month.

SoftBank holds nearly 90% of the chip design company, and Arm's share price recovery has strengthened SoftBank's financial position, easing some of the panic transmitted from credit markets.

Arm is a core component of SoftBank's asset value.

Beyond Arm, Son has built a broad AI portfolio spanning robotics, data centers, and energy, which has reassured some equity investors.

Although concerns remain about the billionaire's massive bet on OpenAI, SoftBank plans to expand into other AI areas — such as building data centers and acquiring ABB's robotics business — and investors believe these assets have upside potential regardless of who ultimately wins the platform competition.

SoftBank has a wide investment footprint, including telecom operator SoftBank Corp, which has millions of users.

The wireless carrier is leveraging strong domestic demand for AI in Japan to build data centers and offer a full suite of enterprise services.

Kirk Boodry, an analyst at Bloomberg Intelligence, said: "If OpenAI underperforms expectations, sentiment would deteriorate significantly, but SoftBank still holds assets in other areas. In the Japanese market, it's very rare to find a target that can benefit so comprehensively from the global AI boom."

SoftBank's stock discount to its real-time net asset value has further widened, offering an entry opportunity for investors bullish on AI growth.

Bloomberg Intelligence data shows that as of September 29, SoftBank shares traded at a 24% discount to net asset value, wider than the year-to-date average of 20%.

Takumi Nishida, a fund manager at Asset Management One, said: "Once a suitable catalyst emerges, the potential for a stock valuation re-rating does exist. There was once market discussion about SoftBank shares trading at a premium to net asset value."

But Nishida said that due to intense competition among AI development companies and persistently rising financing costs, he prefers to invest directly in AI hardware suppliers, such as memory chip maker Kioxia.

He holds a lower SoftBank position compared to the benchmark weight in the TOPIX.

He is not alone in this view.

Concerns about intensifying competition in the AI model race and growing debt levels continue to weigh on SoftBank's share price.

SoftBank completed an $11.1 billion bond issuance last month, the largest ever corporate junk bond offering, to fund Son's ambitious AI investment plans.

Although ample subscription demand allowed for lower issuance pricing, overall financing costs remain higher than historical levels.

According to S3 Partners data, some investors are betting on SoftBank's share price declining, with short interest as a percentage of free float rising to 2.36% this week, a new high for the year.

Han Zhihao, an analyst at Sparks Asset Management, said SoftBank's long-term stock discount to net asset value indicates that the equity market has already priced in a certain degree of credit risk.

"If CDS spreads continue to widen, the boost to the share price from further net asset value growth will be limited."

Even so, SoftBank's share price has recovered somewhat after falling from its June high, gaining about 52% this year.

Bloomberg-compiled data shows most analysts are bullish on the outlook: 17 buy ratings, 6 hold ratings, and 1 sell rating.

The average 12-month price target among analysts is 9,061 yen ($57.21), compared to the stock's Thursday close of 6,701 yen on the Tokyo market.

In the June quarter, SoftBank recorded a net profit thanks to its Intel stake, giving the tech investment group ample confidence to wait for OpenAI and dozens of other billion-dollar AI projects to deliver returns.

Hiroki Takei, a strategist at Resona Holdings, said: "If the AI boom ultimately turns into a bubble and bursts, SoftBank would be hit hard given its highly leveraged investments. But judging from the latest earnings, high financing costs are seen more as a tail risk, and the market generally believes this bond issuance is to fund growth investments."