AI Faith Is Burning Your Wallet

Did you know that SBG's profit is only on paper? Can you explain why their cash is decreasing?

~ The 3.89% stock price increase was an exposure of the AI bubble ~

On May 14, 2025, SoftBank Group (SBG) stock rose 3.89% following their earnings announcement. But those who are excited by that 'positive reaction' are likely only those who haven't read the financial results closely.

The headline 'First profit in four years' was certainly flashy.
However, the reality is supported only by accounting magic akin to 'fattening through fire' and a narrative bordering on the faith that 'AI will save everything'.

SBG's profit is not the result of generating cash.
In fact, their cash on hand is decreasing. If you still think 'it's safe because it's profitable,' you might already be a believer in the 'AI cult economy'.

Looking at the numbers, it is obvious how hollow this stock price increase is and how it is built upon a dangerous illusion.

The true nature of the profit is a 'conveniently inflated phantom'
Most of the net profit recorded by SBG comes from valuation gains on held stocks and foreign exchange gains. In other words, they didn't actually earn it. It is 'paper alchemy' where the numbers on the books have simply inflated.
Even CFO Goto stated,
'This is not the corporate value itself,' effectively revealing the trick behind the magic himself.

The driving force behind the valuation gains was the performance of others, such as ByteDance, T-Mobile, and Deutsche Telekom. SBG's core business is left out in the cold.

Vision Fund: Hiding the mud of the whole with a few wins
SVF is reported to have a profit of 387.6 billion yen, but that is only because a few investments jumped in value. Starting with WeWork, a mountain of damaged projects still remains.

There is no underlying strength that can be called a 'recovery,' and if the market changes direction, the next earnings report will likely see another mountain of valuation losses built up.

The 'leverage noose around the neck' of a soaring LTV
LTV (Loan to Value) has surged from the 8% range last period to around 18% this period. The reason is clear: massive investment in OpenAI and the depreciation of stock value.

Arm shares are being offered as collateral.
In other words, if the AI fever cools and Arm shares fall, SBG faces the risk of having its funds drained by margin calls. The structure of accumulating debt without selling assets is truly a circus act.

An investment strategy drunk on the drug called 'AI'
4 to 5 trillion yen for OpenAI, the Ampere acquisition, the Stargate project... Masayoshi Son has once again taken the stage as a 'storyteller of myths.' But all of it is not only 'unrealized,' it is in the realm of the 'unconfirmed'.

OpenAI's path to profitability is opaque, and Ampere has not established a solid position in the highly competitive semiconductor industry. As for the Stargate project, only the name is wandering around, and the future always shines only within the presentations.

Hand-to-mouth financing
In 2025, SBG raised 600 billion yen through corporate bonds for individuals to prepare for large expenditures such as the 1.3 trillion yen payment for Arm shares. But this is merely 'refinancing debt'.

The fireworks display called the 'AI bubble'
SBG stock rose 3.89% not because the corporate value increased.
It's because someone bought a dream.

Arm, OpenAI, PayPay... If you line up words that evoke the future, the stock price moves. But no one knows when those 'dream stories' will be realized, or if they will be realized at all.

The fuse that lit the powder magazine of that frenzy is the well-worn fuse of valuation gains.

That stock price is not the 'future' but an 'illusion'
What SBG presented was not business growth, but the dream of AI and the phantom of valuation gains. The finances are precarious, and the risks are piling up.

Investing in this stock means betting on the single point that the future will conveniently unfold as expected. But how is that any different from the past 'Alibaba myth' or 'WeWork faith'?

The current stock price is not the result of a calm assessment. It is simply the result of igniting the most flammable 'dream story' within the AI bubble.

Prudent investors should quietly distance themselves from the powder keg.

Rintaro Takechi (Editor-in-Chief, Weekly Bubble Watch)