Shares of SoftBank Group fell on Friday as investors worldwide reeled in artificial intelligence stocks, triggering a sell-off across the sector. The stock plunged more than 8% in Tokyo, extending losses from earlier this week as a shift in sentiment toward the high-flying technology sector drove prices down.

The sell-off comes as doubts grow over whether valuations for AI-related startups have surged too high, too quickly. Investors flocked to the sector all year, but now they are cashing out and reconsidering how soon AI companies can turn technological promise into reliable revenue.

SoftBank has become one of the most ardent champions of AI globally. Between its Vision Funds and direct investments, the firm has holdings in semiconductor manufacturing, artificial intelligence software, data infrastructure, and robotics. This stance also makes the company especially vulnerable as investor sentiment swings against AI.

The stock had made a modest recovery on Thursday, climbing almost 3 percent after its steep decline the day before. Wednesday’s 10% decline was the company’s worst trading day since April. The rebound was fleeting, however, and Friday’s slide erased those gains.

The broader Japanese tech market was also under pressure. The shares of the semiconductor testing company Advantest plummeted, and those of the chipmaker Renesas Electronics also declined. Shares of Tokyo Electron, a major manufacturer of semiconductor production equipment, also fell. The shares of SK Hynix, a supplier of memory chips to AI data centers, dropped in trading in South Korea.

The decreases are also part of a broader rotation out of high-risk, high-reward sectors, analysts say. Slower chip orders, rising funding costs, and longer times for AI adoption are driving this change.

U.S. tech decline weighs on sentiment

The decline in Asia mirrors losses in major U.S. AI and semiconductor shares from the previous day. Shares of Qualcomm declined after the company reported better-than-expected results, but noted that it could lose a future supply deal with Apple. AMD, which had rallied earlier in the week with hopes for AI chip demand, also lost ground. Software companies closely associated with developing AI technology, such as Palantir and Oracle, also fell.

Even Nvidia and Meta Platforms, among the companies central to the current AI boom, finished lower in the U.S. session. Their weakness sent a message to global investors that momentum in the sector could be waning, at least in the short term.

Market strategists say investors are rethinking their assumptions about how quickly AI investment will lead to profit growth. Still, many companies are investing large sums in research and cloud infrastructure, as well as manufacturing their own specialized computer chips, without immediate returns on such investments.

SoftBank feels pressure over its bet on a diminished AI future

Under Chief Executive Masayoshi Son, SoftBank’s long-term strategy is based on the conviction that artificial intelligence will revolutionize industries worldwide. The company’s investment in Arm, the British chip designer whose architecture forms the basis of many of the world’s mobile and data devices, has been a key component of this strategy. Gains in Arm’s valuation during the first part of the year had helped buoy SoftBank’s overall view.

However, its fortunes have swung dramatically as markets have gyrated. The Vision Funds are also undergoing an overhaul, as SoftBank reduces its holdings in non-core assets and focuses more closely on companies with AI links.

As global markets become more cautious, the company is now under pressure to demonstrate clearer and more immediate pathways to profitability from its AI investments. As earnings arrive and central banks make decisions, as global chip demand applies pressure (and occasionally relief) to stocks, investors will be trying to decide whether the current selloff is a quick correction or the beginning of something more lasting.

The next few weeks will present a critical juncture for SoftBank in determining how its AI narrative unfolds in the market.

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