SoftBank stock has been in a strong downtrend this month and is now trading at its lowest level since April. It has slumped 61% from its all-time high and just formed a death cross, suggesting further downside as earnings approach.
SoftBank stock has slumped as portfolio companies tumble
Masayoshi Son’s SoftBank Group is struggling as most of its investments start going south. A key concern is OpenAI, a company that SoftBank borrowed heavily to invest in. Cumulatively, it has invested over $64 billion in the company, mostly using borrowed money.
On paper, SoftBank’s investment has been profitable as the company recently raised $11 billion at a $1.25 trillion valuation. However, in reality, this investment poses substantial risks to the company.
For one, OpenAI’s decision to settle on a $1.25 trillion valuation was a forced one, as the company was seeking a $1.4 trillion. It aimed to raise $30 billion from investors.
There is a risk that OpenAI’s valuation will drop further once the company goes public next year. Most of the recent IPOs, including popular companies like Circle Internet Group and SpaceX have tumbled from their peak.
SoftBank’s publicly traded companies are also not doing well. The company already owns a 86% stake in Arm Holdings, a company that dominates the chip industry. After soaring to $452 earlier this year, the stock has slumped to the current $174. This sell-off intensified last week as it published its financial results, which showed that its smartphone royalties were softer than expected.
Meanwhile, one of SoftBank’s top success stories, Intel, is becoming undone. The company invested $2 billion in the company last year, acquiring the stock at $23 per share. This investment surged as Intel’s shares jumped to $141.
Recently, however, Intel’s shares have plummeted to $56.28 and is hovering around its lowest level since April 26. Its stock continued falling as its earnings report showed that its PC revenue remained under pressure last quarter.
These investments helped to drive SoftBank’s profits in the second quarter. In its report, the company said that its net profit rose to 347.3 billion yen ($2.2 billion), higher than the 120.23 billion yen that analysts expected. As such, these gains will be undone in the coming earnings report.
SoftBank share price technical analysis
SoftBank stock chart | Source: TradingView
The daily chart shows that the SoftBank stock has been in a strong sell-off in the past few months. It has dropped from a high of ¥9,063 earlier this year to the current ¥3,550.
Most importantly, the stock has just formed a death cross pattern, which happens when the 50-day and 200-day moving averages cross each other. This pattern normally leads to more downside.
Therefore, the stock will likely continue falling as investors target the key support level of ¥3,000. This sell-off will accelerate as the company publishes its earnings and as the AI jitters remain.
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