SoftBank stock price tanks over 14%; erodes nearly $50 billion in market cap over two days

Japan's SoftBank stock price fell over 13 per cent on Tokyo Stock Exchange on Wednesday, November 5, following a Wall Street sell-off driven by concerns over the high valuations of such firms.

On Tuesday, SoftBank stock fell over 7 per cent, wiping out almost $50 billion in market capitalisation over the past two days.

However, SoftBank stock has proven to be a multibagger stock as it has surged nearly 206 per cent in just six months and 154 per cent in one year.

What's behind the plunge?

SoftBank has developed a diverse portfolio of AI-focused investments across infrastructure, semiconductor, and application segments.

The company holds a controlling stake in U.K.-based Arm Holdings, whose chip designs are integral to mobile and AI processors, and it recently acquired Ampere Computing to enhance its AI data center operations.

Other semiconductor and AI stocks also witnessed a downturn in Asian trading on Wednesday. Semiconductor testing equipment maker Advantest slipped over 8 per cent, meanwhile, chip manufacturer Renesas Electronics fell 6 per cent in Asian trading.

Shares of Nasdaq-listed Arm Holdings fell 4.71 per cent overnight.

According to media reports, the decline in AI and semiconductor stocks was followed by an 8 per cent overnight fall in U.S. software firm Palantir’s shares, despite the company beating third-quarter estimates. Investor sentiment weakened as lofty valuations across the AI sector weighed on markets. The AI-driven surge has lifted the S&P 500’s forward P/E ratio above 23 — its highest level since 2000, according to FactSet, as quoted by CNBC.

US IT stocks also witnessed a strong downturn after Michael Burry — known for forecasting the 2008 financial crisis — revealed short positions on Palantir and Nvidia, two key beneficiaries of the ongoing AI rally.

Nvidia stock price dropped 4 per cent overnight, while AMD stock fell 3.7 per cent in after-hours trading as its results failed to excite investors.

What do market experts say?

The growing excitement surrounding AI has raised worries that the markets might be experiencing a technology bubble.

Some analysts believe the valuations of AI firms are beginning to mirror the dot-com boom of the late 1990s, as share prices surge well beyond realistic profit projections.

“There is fear of an AI correction, and if it comes, it will sweep the rest of the market with it due to the heavy weight of the leading names,” market veteran Louis Navellier was quoted as saying by CNBC.

(With inputs from agencies)

Disclaimer: This story is for educational purposes only.