A year-end fund raising that affects the AI beliefs of US stocks! SoftBank made every effort to sprint to $22.5 billion, and Masayoshi Sun almost entirely bet on OpenAI's “AI dream”

The Zhitong Finance App learned that some media quoted information revealed by people familiar with the matter as reporting that Japanese investment giant SoftBank Group (SoftBank Group), founded and led by legendary investor Sun Zheng, is racing against the clock to complete a financial commitment of up to $225 billion to ChatGPT developer OpenAI by the end of the year, including selling part of its long-term investment scale, and possibly using its valuable shares in Arm Holdings (ARM.US), the leading chip design company it owns Mortgage loans are those margin loans that haven't been used yet.

This SoftBank Group's “heavy” bet on OpenAI is one of SoftBank CEO Sun Zhengyi's biggest moves in the field of artificial intelligence so far. The Japanese billionaire, who became famous for his early bet on Alibaba, is trying to establish the SoftBank Group's central position in the global artificial intelligence competition. To raise capital, Sun Zhengyi has sold all of SoftBank's hugely profitable 5.8 billion US dollar “AI chip” superleader Nvidia (NVDA.US) shares, and also sold T-Mobile US (TMUS.US) shares, one of the US telecom operators worth 4.8 billion US dollars, and made drastic layoffs.

The 67-year-old founder of SoftBank, Sun Zhengyi's “Artificial Intelligence Superplan” — mainly focuses on SoftBank, where he is at the helm, being able to play the most central role comparable to Nvidia in the global spread of AI. There is no doubt that Sun Zheng, famous for his early bet on Alibaba, hopes to enjoy the huge return on investment brought by the global AI superwave. The core of this promotion is the US$500 billion “Stargate” (Stargate) hyperscale data center construction project in the US carried out with OpenAI, Oracle, and MGX, an Abu Dhabi technology investment fund, and huge long-term investments in leading artificial intelligence companies such as OpenAI and TSMC through ARM, a chip design leader with a 90% shareholding ratio in SoftBank.

Two people familiar with the matter told the media that Sun Zhengyi has slowed down most of the other transaction matching activities of SoftBank's “Vision Fund” to a near standstill, and any deal over 50 million US dollars now requires his clear approval.

According to people familiar with the matter, SoftBank, led by Sun Zhengyi, is promoting the listing of its digital payment application operator PayPay. The initial public offering (IPO), which was expected to take place this month, was completely delayed due to the 43-day shutdown of the US government; the federal government shutdown ended in November. People familiar with the matter said that PayPay's initial public launch — which may raise more than $20 billion — is now expected to take place in the first quarter of next year.

One person familiar with the situation said that the Japanese conglomerate is also seeking to cash out some of its holdings in Didi Global; Didi Global is the dominant online car-hailing platform operator in the Chinese market. The two people familiar with the matter mentioned above said that the investment managers of SoftBank Vision Fund are being personally guided by Sun Zhengyi to shift their focus to the OpenAI deal.

SoftBank's hectic fundraising campaign to raise capital gave the outside world a glimpse: even one of the world's largest deal makers faced pressure when competing to finance huge AI data center projects worth hundreds of billions of dollars. Officials from SoftBank declined to comment.

SoftBank has a variety of options

People familiar with the matter said that OpenAI has yet to receive the remaining funds, but it is expected that all of this money will be paid before the end of 2025 as agreed in the contract.

According to people familiar with the matter, SoftBank has various sources of cash at its disposal, including margin loans, cash on balance sheets, shareholding in listed companies, and corporate bonds or bridge loans.

Sun Zhengyi has every reason to use various financing mechanisms to fulfill his funding obligations with respect to OpenAI. SoftBank reached an agreement in April to invest in OpenAI at a valuation of $300 billion. Since then, OpenAI's valuation has risen sharply, and the AI startup is actively negotiating, including the $10 billion investment that Amazon (AMZN.US) will bring. One of the people familiar with the matter added that these financing negotiations will soar its valuation to close to $900 billion, which is equivalent to a triple; once the deal is completed, this huge investment in OpenAI will bring substantial book returns to SoftBank.

One of SoftBank's major capital pools comes from unspent margin loans secured by its shares in the UK-based semiconductor and software design company Arm Holdings. According to information, SoftBank recently increased its margin loan amount by 6.5 billion US dollars, bringing the total unused amount to 11.5 billion US dollars. Arm's stock price has tripled from its initial IPO price, providing SoftBank with larger collateral space to expand its financing and borrowing capabilities.

SoftBank reports that as of September 30, its parent company-level cash was approximately 4.2 trillion yen (US$27.16 billion). According to LSEG statistics, the group still holds about 4% of T-Mobile US and is still the second-largest shareholder of the US wireless operator; as of the end of September, this holding was worth about $11 billion.

Furthermore, although SoftBank's investment pace is not as active as before, SoftBank continues to support AI startups such as Sierra and Skild AI.

OpenAI is in dire need of this money, and so does Oracle

Both OpenAI and SoftBank are core participants in the “Stargate” (Stargate Project); “Stargate” is a $500 billion project aimed at building large-scale AI data centers for training and inference in the US.

This racing wave of data center construction has also prompted hyperscale tech giants, including Oracle, Microsoft, and Facebook's parent company Meta Platforms (META.US), to commit to invest an unprecedented scale of capital into these constructions—these constructions require huge AI chips, electricity, cooling equipment, and massive server clusters, and bring in well-funded partners to share risks. Since these tech giants took on debt in November, and Oracle, the leader in cloud computing, which deeply lays out AI computing power clusters, failed to hand over a very satisfactory performance report, these tech giants' heavy capital expenditure has raised serious concerns about “what will happen if these investments fail to bring a commensurate return”, thus exacerbating the specter of the bursting of the “AI bubble.”

SoftBank promised to invest up to $30 billion in OpenAI in April — of which $10 billion was delivered to the startup in the same month. The rest of the money depends on the AI startup transforming into a for-profit company by the end of the year; this is an ambitious feat that OpenAI had previously achieved in October.

This new funding is critical to cover OpenAI's rising costs of training and running its cutting-edge AI models, as competitive pressure from Alphabet's Google continues to increase. OpenAI CEO Sam Altman recently told employees that the company is entering a “red alert” phase to do everything it can to improve ChatGPT — and even delay the launch of other products to counter the strong momentum of Google Gemini.

In October, Altman said that OpenAI's goal is to build a 30-gigawatt AI computing power infrastructure at a cost of 1.4 trillion US dollars. He said that in the end, he hopes OpenAI can add 1 gigawatt of computing power every week — a huge and seemingly unattainable goal, because currently every gigawatt is associated with more than 40 billion US dollars in AI capital costs.

This huge amount of financing from SoftBank is not only critical to OpenAI, but it also affects Oracle's financial fundamentals and whether the AI investment boom in the US stock market as a whole can continue. The market is generally beginning to worry that OpenAI will not be able to generate enough revenue to pay for its huge AI computing power infrastructure promises to cloud computing companies such as Oracle and Coreweave. This concern even caused Oracle to have its debt rating downgraded by Barclays Bank. Its credit default swap (CDS) spread once soared to a 16-year high of about 156 basis points, and the market even began pricing its bankruptcy risk over the next 5 years. Therefore, this round of OpenAI financing has a significant booster effect on the AI computing power industry chain. The capital obtained by OpenAI will mainly be used to pay for computing power costs, which means that AI data center service providers such as Oracle will receive a continuous and stable source of revenue.