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New Delhi: SoftBank Group is working swiftly to ensure that by the close of the year it will have secured a huge financing commitment of up to $22.5 billion to OpenAI, a move that clearly shows that founder Masayoshi Son has regained the impetus to conquer the artificial intelligence competition. As the reports show, the Japanese conglomerate is drawing on various sources of funds, such as asset sales and loans secured by its valuable Arm Holdings stake, to meet the deadline.
It is also one of the most risky investments that Son has ever made since SoftBank tries to reinvent itself at the heart of the global AI boom. Although the financing is not yet fully moved to OpenAI, the agreement permits the payments to be made by the close of 2025, and thus SoftBank has a certain amount of leeway to rearrange its balance sheet.
To finance the OpenAI deal, SoftBank has already disposed of all its stock in Nvidia, which is estimated to be valued at about $5.8 billion, and sold off approximately $4.8 billion dollars of its shares in T-Mobile US. The group has also slowed its operations in its Vision Fund, with the majority of new deals being frozen unless they are directly approved by Son. The effort also includes cost-cutting measures such as staff reduction.
SoftBank is also gearing up towards the long-awaited IPO of PayPay, which is its payments division. The IPO will also raise over $20 billion in valuation and will be delayed until the first quarter of the next year because of the recent US government shutdown. The company is also considering exits of holdings like Didi Global, which intends to list in Hong Kong following delisting in the US.
One of the possible sources of funding is the ownership that SoftBank has in Arm Holdings. The group has recently increased its margin loan facility to $11.5 billion, which is propelled by the good share price results of Arm since its IPO. Softbank now has more capacity to borrow, as the Arm stock has increased threefold.
Parent-level cash of 4.2 trillion yen, or approximately 27 billion dollars, according to SoftBank as of September 30. It also continues to own a decent 4 per cent stake in T-Mobile US, which is worth about 11 billion dollars, which provides it with additional financial leeway in spite of the active AI thrust.
In April, SoftBank agreed to make a bet in OpenAI worth approximately 300 billion. The valuation of OpenAI has since skyrocketed, and discussions are underway which will potentially value it at almost 900 billion dollars should new investors join the company, such as Amazon. Such an increase would make a substantial paper gain for SoftBank upon the deal's completion.
OpenAI is very dependent on the funding because it is experiencing a surging cost of training and executing advanced AI models. The level of competition is becoming tougher, particularly with Gemini by Google. The CEO of OpenAI, Sam Altman, has informed employees that it is in a code red stage and is concerned with refining ChatGPT and reducing the rate of other product releases to stay ahead.
SoftBank and OpenAI are also sponsors of Stargate, a 500 billion project that would construct massive AI data centres in the US. The initiative is in line with the efforts of Washington to stay ahead of China in artificial intelligence but carries a massive capital cost.
The wider scramble towards AI infrastructure by firms such as Meta has cast the question of whether the money is going to be rewarded. As OpenAI aims at tens of gigawatts of novel calculation capacity at mind-bending payments, the all-in bet by SoftBank not only points to the potential of AI but also to the economic burden the world now puts even on the largest dealmakers.
