Softbank Group Corp, led by billionaire investor Masayoshi Son, is scrambling to finalize a $22.5 billion funding commitment to OpenAI, developer of ChatGPT, before year-end. The Japanese investment giant plans to raise capital through multiple channels, including divesting long-held assets and potentially leveraging untapped margin loans secured by its stake in chip designer Arm Holdings (ARM.US).
This massive bet on OpenAI represents one of Softbank’s largest AI-focused investments to date. Son, who gained fame for his early backing of Alibaba, aims to position Softbank as a central player in the global AI race. To fund this push, Softbank has already sold its entire $5.8 billion stake in AI chip leader Nvidia (NVDA.US) and $4.8 billion worth of T-Mobile US (TMUS.US) shares while implementing significant workforce reductions.
Son’s AI vision hinges on Arm, in which Softbank holds a 90% stake, collaborating with OpenAI, Oracle, and Abu Dhabi’s MGX on the $500 billion "Stargate" hyperscale data center project in the U.S. The initiative is part of Softbank’s broader strategy to invest heavily in AI leaders like OpenAI and TSMC.
Sources indicate that Softbank has nearly halted other Vision Fund dealmaking, with any transaction exceeding $50 million now requiring Son’s direct approval. The group is also preparing for the IPO of its digital payment app PayPay, initially slated for this month but delayed due to the U.S. government shutdown. The listing, potentially raising over $20 billion, is now expected in Q1 2025.
Additionally, Softbank is exploring partial divestment of its stake in Chinese ride-hailing giant Didi Global. Meanwhile, Vision Fund managers have been redirected to prioritize the OpenAI deal, highlighting the pressure even major investors face in financing multi-billion-dollar AI infrastructure projects.
Softbank has multiple funding options, including margin loans, cash reserves, public equity holdings, and corporate debt. In April, Softbank agreed to invest in OpenAI at a $300 billion valuation. Since then, OpenAI’s valuation has surged, with ongoing talks—including a potential $10 billion investment from Amazon (AMZN.US)—that could push its worth to $900 billion, tripling Softbank’s paper gains.
A key funding source is Softbank’s untapped $11.5 billion margin loan facility backed by its Arm stake. Arm’s stock, which has tripled since its IPO, provides additional collateral for borrowing. As of September 30, Softbank held $27.16 billion in cash and retains a 4% stake in T-Mobile US worth $11 billion.
OpenAI and Softbank are central to the Stargate project, a $500 billion effort to build AI data centers in the U.S. This race has prompted tech giants like Oracle, Microsoft, and Meta Platforms (META.US) to commit unprecedented capital to AI infrastructure, raising concerns about ROI and potential bubbles.
Softbank’s April pledge included an initial $10 billion to OpenAI, with the remainder contingent on the startup’s transition to a for-profit entity—a milestone achieved in October. The fresh funding is critical for OpenAI to cover soaring AI model training costs amid intensifying competition from Google’s Gemini. CEO Sam Altman recently warned employees of a "code red" effort to enhance ChatGPT, delaying other products to counter Google.
Altman has outlined a $1.4 trillion plan to build 30 GW of AI compute infrastructure, targeting 1 GW weekly—a daunting goal given the $40 billion+ cost per GW. Softbank’s financing is vital not just for OpenAI but also for Oracle’s financial stability and the broader AI investment boom.
Market worries persist over OpenAI’s ability to generate sufficient revenue to meet its cloud infrastructure commitments, leading Barclays to downgrade Oracle’s debt rating. Oracle’s credit default swaps recently hit a 16-year high of 156 bps, reflecting heightened bankruptcy risk pricing.
The OpenAI funding round is expected to buoy the AI compute supply chain, with proceeds primarily allocated to covering compute costs—ensuring steady revenue for data center providers like Oracle.