SoftBank's $119b AI bet under pressure after Republican midterm rout

SoftBank Group Chairman Masayoshi Son faces a critical test after the Republican Party's sweeping defeat in the US midterm elections upended the political foundation of his AI ambitions. The Democratic Party's landslide victory has raised the prospect of tighter regulation on data centers in the United States and clouded the outlook for OpenAI's initial public offering, putting SoftBank's AI investment strategy — which has committed more than 160 trillion won ($119 billion) — at risk, analysts say.

According to the Nikkei on Wednesday, SoftBank Group faces mounting uncertainty in both its US AI data center construction projects and its investment in OpenAI. The company's large-scale investment plans, premised on the Trump administration's policy of expanding AI infrastructure, could now be affected by the changed political landscape following the midterm elections.

SoftBank is a central player in the Stargate Project, a Trump administration initiative to build out AI infrastructure across the United States. The company has invested more than $60 billion in US AI infrastructure, including data centers. It has also committed roughly 10 trillion yen to OpenAI.

Momentum to tighten regulation on data center construction in the United States has grown, raising the likelihood of delays to SoftBank's projects. SB Energy, SoftBank's data center subsidiary, plans to build five data centers across Texas and Ohio, but about 90 percent of those facilities have yet to break ground.

The midterm results dealt a particular blow in those two states: governors who have actively backed stricter data center regulation won in both Texas and Ohio. Tighter rules on data center construction could push back groundbreaking schedules and drive up investment costs.

Uncertainty is also growing on the financing front. Concerns have emerged that SoftBank's planned listing of OpenAI could be delayed, and analysts say SB Energy's own US stock market listing and additional fundraising efforts could be hampered by cooling investor sentiment toward AI.

The pressure is showing up in SoftBank's earnings as well. In second-quarter results for fiscal year 2026 (July–September) announced Tuesday, the company posted a loss for the first time in two years, weighed down in part by losses from its US data center operations.

SoftBank Chief Financial Officer Yoshimitsu Goto expressed concern about the AI market outlook at an earnings briefing and said delays were possible across the company's data center projects. He nonetheless expressed confidence in the long-term growth potential, saying he expects AI service usage to "continue rising sharply, just as internet usage did."

Son has shown no sign of pulling back on AI investment. Speaking at an event in Japan last month, Son said he is often asked whether AI is a bubble. "I think that question itself is wrong," he said. "This is still just the beginning."

Meanwhile, Rapidus, the company leading Japan's effort to rebuild its advanced semiconductor industry, also faces questions about its production timeline. Jiji Press reported that Rapidus is considering pushing back its target for mass production of 2-nanometer semiconductors by one year. Rapidus, however, said it would "devote all efforts toward the goal of beginning mass production in the second half of fiscal 2027," signaling it intends to hold to its existing target.