SoftBank Group's recent rally has exposed significant risks for investors holding short positions, with bearish bets climbing to their highest level in a year. This has fueled market speculation that any forced liquidation could drive the stock even higher.

According to data from S3 Partners LLC, short interest as a percentage of shares outstanding rose to 2.27% as of Wednesday, marking the highest level since July 2025. The data provider also noted that the notional value of short positions stood at $3.9 billion, the largest since early 2015.

Despite the prevailing bearish sentiment, the launch of OpenAI's new GPT-6 Astra model has reignited investor enthusiasm, propelling SoftBank's shares up 31% this month. SoftBank is an investor in OpenAI. S3 data reveals that this surge has resulted in approximately $1 billion in mark-to-market losses for short sellers this month, bringing cumulative year-to-date losses to around $1.2 billion.

Sam Pierson, Director of Research at S3, stated, "Losses put pressure on fund managers holding short positions, and further price volatility can exacerbate this situation." He added that the risk of a short squeeze is currently at elevated levels.

Amid currency fluctuations and renewed tensions in the Middle East weighing on investor sentiment, the potential for a short squeeze and further gains in SoftBank's stock could provide support for the Nikkei 225 index. Data shows that SoftBank holds the second-largest weighting in the index.

Nevertheless, concerns regarding SoftBank's massive artificial intelligence investment plans and funding requirements continue to cast a shadow over its share price outlook, which could potentially offset some losses for short sellers. Tomoichiro Kubota, Chief Market Analyst at Matsui Securities, noted that while the recent rally triggered by the Astra model launch may prompt short covering, the key catalyst lies in the upcoming listing details of SB Energy. "If there is strong demand for SB Energy's IPO and pricing remains firm, this could trigger a short squeeze," Kubota commented.