What next for the falling Softbank stock amid the AI trade unwinding?

Softbank stock continued its strong downward trend, reaching its lowest level since April this year. It dropped to ¥4,595, down by nearly 50% from the year-to-date high. This retreat has pushed its valuation substantially lower to the current ¥30.4 trillion.

Softbank stock drops as key portfolio companies face major headwinds

Softbank, a large telecommunications company in Japan, has become a major proxy for the artificial intelligence industry, thanks to its massive investments in the US and other countries. 

It is the biggest shareholder to Arm Holdings, a company now valued at over $261 billion. Arm Holdings stock has plunged by 46% from its peak this year, and this sell-off may continue when it publishes its earnings.

It is also a participant in the Stargate project that aims to spend over $500 billion in US data centers. Other companies in this project are OpenAI and Oracle.

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Softbank also owns a large stake in OpenAI. It owns about 13% stake in the company through its commitment to invest about $40 billion in the company. 

Therefore, the company’s business is facing substantial challenges despite the ongoing artificial intelligence boom. For example, OpenAI has continued to lose market share in the AI industry. A recent report showed that its share dropped below 50% for the first time ever, with Google’s Gemini and Anthropic’s Claude gaining share.

OpenAI is also facing stiff competition from Chinese companies like Moonshot and DeepSeek. Moonshot’s Kimi K3 model has become one of the most advanced in the industry.

The fear among investors is that corporates and individuals will take advantage of China’s models at the expense of the more expensive American ones. 

These fears explain why OpenAI is said to be considering postponing its initial public offering (IPO) that was expected to happen this year. 

Softbank stock is also plunging because of the ongoing unwinding of the AI trade, with most companies in the industry falling. Kioxia Holdings stock has dropped by over 60% from its peak, while top South Korean names like SK Hynix and Samsung being in a deep correction.

The next few days will be important for the Softbank stock. For one, big tech companies like Meta Platforms and Microsoft will publish their financial results, providing more color on the state of capital spending in the AI space. 

A sign that these companies are continuing to spend will be bullish for their suppliers. However, as we saw with Google stock, investors are now more focused on the return on investment.

Softbank share price technical analysis

Softbank stock chart | Source: TradingView

The weekly chart shows that the Softbank stock has plunged in the past few months, moving from ¥9,077 to the current ¥4,730. It recently dropped below the 50% Fibonacci Retracement level. 

The stock has now plunged below the 50-week Exponential Moving Average (EMA) and the Major S/R pivot point of the Murrey Math Lines tool. Also, the Relative Strength Index (RSI) has pointed downwards.

Therefore, the stock will likely continue falling, potentially to the 61.8% Fibonacci Retracement level of ¥4,165. This retreat will continue as sentiment in the industry wanes.