SoftBank sold stakes in Nvidia and T-Mobile to fund OpenAI efforts
SoftBank may use undrawn margin loans backed by Arm shares
Officials say the IPO of SoftBank payment app “PayPay” will be postponed until the first quarter of 2026 due to the U.S. government shutdown.
OpenAI needs funding for AI data center projects as competition intensifies
New York/Tokyo/San Francisco, Dec. 19 (Reuters) – SoftBank Group (9984.T)opens a new tab is rushing to complete its $22.5 billion funding commitment to OpenAI by the end of the year through a series of financing schemes that include the sale of some investments, potentially leveraging an undrawn margin loan secured by a valuable ownership interest in chip company Arm Holdings Inc., the people said.
The “all-in” bet on OpenAI is one of the biggest ever by SoftBank CEO Masayoshi Son, as the Japanese billionaire aims to improve his company's position in the artificial intelligence race. To raise funds, Son has already sold all of SoftBank's $5.8 billion stake in AI chip giant Nvidia (NVDA.O).opens a new taboffloaded $4.8 billion from T-Mobile US (TMUS.O)opens a new tab Bet, and slashed the staff.opens a new tab
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Mr. Son has significantly delayed most other transactions in SoftBank's Vision Fund, and deals over $50 million now require his explicit approval, two people familiar with the matter told Reuters.
Son's company is working toward listing payment app operator PayPay. The initial public offering (IPO), originally scheduled for this month, was postponed due to the 43-day U.S. government shutdown that ended in November. PayPay's market debut is likely to raise more than $20 billion, expected in the first quarter of next year, according to a direct source and another person familiar with the effort.
The Japanese conglomerate is also considering liquidating part of its stake in Didi Global (92Sy.D).opens a new tabthe operator of China's dominant ride-hailing platform, is considering listing its shares in Hong Kong after a regulatory crackdown forced it to delist from the U.S. in 2021, people directly familiar with the matter said. Two of the people cited above said investment managers at SoftBank's Vision Fund have been instructed to do a deal with OpenAI.
SoftBank's funding battle illustrates the tensions facing even the world's biggest dealmakers as they compete to finance ambitious AI data center projects worth hundreds of billions of dollars.
SoftBank declined to comment.
Softbank has options.
OpenAI has not yet received the remaining funds, but the funds are expected to be deposited by the end of 2025, as stipulated in the contract, the people said.
SoftBank has multiple sources of capital available to it, including margin loans, cash on its balance sheet, shares in publicly traded companies, corporate bonds and bridge loans, the people said.
Son has strong reasons to use various financing mechanisms to meet these obligations. SoftBank signed a deal to invest in OpenAI in April at a valuation of $300 billion. Since then, OpenAI's valuation has increased dramatically, leading to negotiations with companies including Amazon (AMZN.O).opens a new tabits valuation will triple to nearly $900 billion, one of the sources added. This would allow SoftBank to make significant paper profits once the deal is completed.
SoftBank's main pool of capital is an unused margin loan borrowed through its ownership interest in British semiconductor and software design company Arm Holdings (O9Ty.F).opens a new tab. SoftBank recently expanded its margin lending capacity by $6.5 billion, bringing its total undrawn capacity to $11.5 billion. Since then, Arm's stock has tripled its public offering price, giving SoftBank additional collateral capacity to expand its borrowing capacity.
SoftBank reported 4.2 trillion yen ($27.16 billion) in cash at the parent company level as of September 30. The group still owns about 4% of T-Mobile US and remains the wireless carrier's second-largest shareholder, with its stake worth about $11 billion at the end of September, according to LSEG data.
It continues to back AI startups such as Sierra and Skild AI, even though the pace of investment has been less robust.
OPENAI needs money
OpenAI and SoftBank are both investors in Stargate, a $500 billion initiative to build AI data centers for training and inference, which executives say is critical to the U.S. government's ambitions to stay ahead of China in AI.
A boom in data center construction is prompting tech giants such as Meta Platforms (META.O) to enter the market.opens a new tab It spent unprecedented amounts of money building up the chips, power, cooling and servers it needed, and brought in deep-pocketed partners to spread the risk. Their large capital expenditures have raised concerns about what will happen if the investments do not yield commensurate returns, raising fears that the “AI bubble” may burst.
SoftBank pledged to invest up to $30 billion in OpenAI in April, of which the company will receive $10 billion in the same month. The remaining payments are contingent on the AI startup becoming a commercial company by the end of the year, an ambitious feat OpenAI accomplished in October.
The new funding is crucial to cover Alphabet (GOOGL.O) competitor OpenAI's rising costs of training and running its AI models.opens a new tab Google is gradually gaining momentum. OpenAI CEO Sam Altman recently told employees that the company is entering a “code red” phase to improve ChatGPT and slowing rollouts of other products to fend off the momentum of Google's Gemini.
Altman said in October that OpenAI aims to spend $1.4 trillion to build 30 gigawatts of computing capacity. He said he hopes OpenAI will eventually add 1 gigawatt of compute each week. This is a lofty goal considering that each gigawatt currently has a capital cost of more than $40 billion.
Reporting from Echo One in New York, Crystal Hu and Deepa Seetharaman in San Francisco, and Miho Uranaka in Tokyo. Editing: Sayantani Ghosh and Matthew Lewis
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Echo Wang is a correspondent for Reuters, covering the latest news from the intersection of U.S. equity capital markets and Chinese business in the U.S., from the U.S. crackdown on TikTok and Grindr to the restrictions Chinese companies face when listing in New York. She was named the 2020 Reuters Reporter of the Year.
Crystal reports on venture capital and startups for Reuters. She covers Silicon Valley and beyond through the lens of money and people, with a focus on growth-stage startups, technology investing, and AI. She has previously covered M&A for Reuters, breaking stories on President Trump's SPACs and Elon Musk's Twitter fundraising. She previously reported on Amazon for Yahoo Finance, and her research into the company's retail operations was cited by members of Congress. Crystal began her journalism career writing about Chinese technology and politics. She has a master's degree from New York University and enjoys matcha ice cream just as much as she drinks it at work.
