Investors in SoftBank Group Corp. shares are setting aside concerns about the Japanese company's rising borrowing costs and focusing instead on the potential returns from its artificial intelligence bets.

The stock posted its first monthly gain in four months in September, after OpenAI's newly launched GPT-6 Astra model reignited optimism about Masayoshi Son's $65 billion investment in the ChatGPT developer. The shares climbed 24% over four weeks, helped along by OpenAI's latest plan to raise $30 billion at a $1.4 trillion valuation. A rebound in the share price of its chip business, Arm Holdings (ARM.US), also strengthened confidence that the technology investment company can fund its growing debt load.

At the same time, SoftBank's credit default swaps have jumped to their highest level since 2023, with questions about artificial intelligence safety, soaring costs and competition never fully fading. This divergence between SoftBank's CDS and its stock stands in contrast to the selloff in Oracle Corp. (ORCL.US) shares, which invoked a force majeure clause to shield itself from surging data center expenses.

"From an equity standpoint, we are relatively less concerned about the technical details of how they raise money," said David Dai, a managing director at Sanford C. Bernstein in Hong Kong, describing his view on SoftBank. "Assuming they can raise the money, the equity story is actually quite good, because they hold Arm, and Arm is the biggest beneficiary of the rise of agentic AI and higher server CPU usage."

Chipmakers such as Arm forecast that demand for central processing units will reach hundreds of billions of dollars by 2030. As users of services like Meta Platforms (META.US) Muse increasingly ask AI agents to execute code and use web browsers, general computing orders are on the rise. David Dai estimates the market could grow to as much as $330 billion. He said Arm's order outlook is equally upbeat.

After nearly halving from a June peak, Arm shares are regaining momentum, rising about 20% last month. That has shored up SoftBank's financial position, since it owns nearly 90% of the chip architecture company, and has helped ease some of the concerns spilling over from credit markets. Arm accounts for a considerable share of SoftBank's asset value.

Beyond Arm, Son's diversified positioning across the AI landscape, from robotics and data centers to energy, has also reassured some equity investors. While the billionaire's escalating bet on OpenAI remains a worry, investors take comfort in SoftBank's plans to expand its footprint in other AI areas, such as data centers and its planned acquisition of ABB's robotics business, viewing them as offering upside no matter who wins the platform battle.

SoftBank's broad portfolio also includes telecom operator SoftBank Corp., which has millions of users. The wireless service provider now hopes to benefit from the Asian nation's appetite for artificial intelligence, building data centers and offering a full suite of enterprise services.

"If OpenAI performs poorly, sentiment would be much worse, but they do have assets in other areas," said Kirk Boodry, an analyst at Bloomberg Intelligence. "It is rare to find a stock that gives this kind of exposure to the global AI boom, especially in the Japanese context."

A widening discount to real-time net asset value also offers an entry point for those who believe in AI growth. According to Bloomberg Intelligence data, as of September 29, SoftBank shares traded at a 24% discount to net asset value, wider than the 20% average so far this year.

"I think these shares certainly have the potential to be re-rated if the right catalyst emerges," said Nishida Takumi, a fund manager at Asset Management One, adding that there has been market discussion of SoftBank trading at a premium to net asset value.

Still, Nishida said that given fierce competition among AI developers and rising borrowing costs, he prefers to invest directly in AI hardware suppliers, such as memory chip maker Kioxia Holdings Corp. He holds fewer SoftBank shares than the stock's weighting in the Tokyo Stock Price Index.

He is not alone in that thinking. Concerns about intensifying competition among AI models and surging debt continue to weigh on SoftBank's share price. Last month, SoftBank raised $11.1 billion through a record-sized corporate junk bond sale to fund Son's ambitious AI plans. Although demand was strong enough to push down pricing, its borrowing costs overall remain higher than in the past.

Some investors are betting against SoftBank shares: according to S3 Partners data, short interest as a percentage of tradable float rose to 2.36% this week, a high for the year. According to Han Jiho, an analyst at Sparx Asset Management, SoftBank's persistent discount to net asset value shows the stock market is already pricing in a degree of credit risk.

"If CDS spreads continue to widen, further NAV gains may have a limited impact on the share price," he said.

Even so, after a sharp drop from its June peak, the company's shares have recovered and are up about 52% this year. According to aggregated data, most analysts expect the trend to continue: 17 buy ratings, 6 holds and 1 sell, with an average 12-month target price of 9,061 yen ($57.21), compared with Thursday's Tokyo close of 6,701 yen.

In the June quarter, SoftBank posted a net profit, mainly thanks to its stake in Intel. That gives the technology investment company room to keep waiting for returns on its OpenAI bet and other multibillion-dollar AI projects.

"If the AI boom ultimately proves to be a bubble and bursts, the damage could be severe given their leveraged investments," said Hiroki Takei, a strategist at Resona Holdings. "But given the latest results, rising borrowing costs are seen more as a tail risk, while funding through bond issuance is largely viewed as the financing needed for growth investments."