SoftBank halts $50 billion Switch Inc. data center deal, threatening Stargate AI ambitions

SoftBank Hits the Brakes on Talks to Buy Data Center Firm Switch

SoftBank has doubled down on its bets in AI in recent months, including amassing an 11% stake in OpenAI and buying US chip designer Ampere Computing LLC for $6.5 billion. SoftBank Group Corp. has halted talks about an acquisition of US data center operator Switch Inc., a setback to founder Masayoshi Son's ambition to roll out Stargate AI infrastructure, according to people familiar with the matter. For months, Son pursued a deal of around $50 billion for Switch, convinced that direct control of the latter's network of energy-efficient data centers would help the $500 billion Stargate push to generate computing power for partner OpenAI. But earlier this month, Son conceded that a full acquisition was off the table and scrapped a planned January announcement, the people said, asking not to be named because the matter is private. The two sides remain in active discussions about a partial investment or a partnership, they said. Earlier this month, SoftBank inked a $3 billion deal to buy New York-listed investment firm DigitalBridge Group Inc., which holds a majority stake in Switch. A SoftBank spokesperson did not respond to a request for comment. Representatives of Switch and DigitalBridge declined to comment. The deal would have been one of the Japanese company's biggest to date, and would have given a much-needed boost to the Stargate Project to build US data centers. Son had seen that project as a key path to play a bigger role in an artificial intelligence race and had pledged to deploy $100 billion "immediately" alongside OpenAI, Oracle Corp. and Abu Dhabi's MGX. Some within the SoftBank camp had been wary about the size of the deal as well as the logistics of running data center campuses from Las Vegas to Atlanta, the people said. Switch is simultaneously preparing for an initial public offering as soon as this year, and the company's backers have considered a valuation of about $60 billion including debt via a stock-market listing. Any deal would also likely come under scrutiny from the Committee on Foreign Investment in the US. Get the Tech Newsletter bundle. Get the Tech Newsletter bundle. Get the Tech Newsletter bundle. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg may send me offers and promotions. Plus Signed UpPlus Sign UpPlus Sign Up By submitting my information, I agree to the Privacy Policy and Terms of Service. While it's unlikely that SoftBank and Switch will revive talks about a full acquisition, the two sides may find a way in the future, given Son's keen interest in a deal. The billionaire has said he eyed Arm Holdings Plc for years before he was able to acquire the UK chip designer in 2016. SoftBank also owns an Ohio manufacturing facility that is operated by Taiwan's Hon Hai Precision Industry Co., which might be a model for a partnership with Switch. Despite being early to invest in AI technologies, Son and SoftBank have largely missed out on a global rush to build the semiconductors, server racks and other hardware to support machine learning, with the lion's share of money flowing to a small circle of chipmakers including Nvidia Corp. and Taiwan Semiconductor Manufacturing Co. SoftBank has doubled down on its bets in AI in recent months. Over the past year, the Tokyo-based company has amassed an 11% stake in OpenAI, injecting $22.5 billion just last month. It bought US chip designer Ampere Computing LLC for $6.5 billion and announced a $5.4 billion acquisition of ABB Ltd.'s robotics unit. To finance some of that cost, SoftBank has sold down its T-Mobile US Inc. shares, unloaded its entire Nvidia stake and expanded a margin loan using its Arm shares. SoftBank's investments in AI, along with the sharp drop in the value of Arm shares at the end of last year, are heaping pressure on its creditworthiness, S&P Global Ratings warnedBloomberg Terminal earlier this month. While SoftBank has a record of discipline with managing its finances, "if it does not take prompt easing measures, such as liquidation of held assets, pressure will intensify on the credit ratings," analysts Kei Ishikawa and Makiko Yoshimura wrote in a report.

SoftBank's $50 Billion Data Center Bid To Power OpenAI Falls Apart - SoftBank Group (OTC:SFTBF), SoftBank Group (OTC:SFTBY)

SoftBank Group Corp. (OTC:SFTBF) (OTC:SFTBY) has paused acquisition discussions with U.S. data center operator Switch after founder Masayoshi Son pursued a deal valued at around $50 billion for several months. Son had sought direct control of Switch's energy-efficient data center network to support Stargate's goal of generating computing power for OpenAI, Bloomberg reported on Monday, citing sources familiar with the matter. Earlier this month, Son pulled a planned January announcement and accepted that a full purchase would not move forward. Partnership or Minority Investment Still Under Discussion The same people said SoftBank and Switch remain in active talks about a smaller investment or partnership. In December, SoftBank agreed to buy global alternative asset manager DigitalBridge Group in a $4 billion deal. Reportedly, DigitalBridge backs Switch. Deal Concerns and Broader AI Strategy Shape Next Steps People familiar with the situation told Bloomberg that some within SoftBank were concerned about the sheer size of the deal and the operational challenge of managing data center campuses across multiple U.S. cities. They also said Switch has been preparing for a potential IPO by 2026 and that its backers have discussed a valuation of about $60 billion. SoftBank has moved aggressively to reposition itself around artificial intelligence, completing a $40 billion investment in OpenAI that secured a stake of more than 10% at a $260 billion pre-money valuation. The company funded the deal by reshaping its balance sheet, selling its entire Nvidia Corp. (NASDAQ:NVDA) stake, scaling back Vision Fund activity, unloading billions of dollars in T-Mobile US, Inc. (NASDAQ:TMUS) shares, and tightening capital allocation. SoftBank has also lined up additional liquidity options, including potential asset sales, a PayPay IPO, and margin loans backed by its Arm Holdings Plc (NASDAQ:ARM) stake, to concentrate resources on AI infrastructure projects. Image via Shutterstock SFTBFSoftBank Group Corp $128.00381.0% Overview SFTBYSoftBank Group Corp $13.18-0.08% ARMARM Holdings PLC $116.840.66% NVDANVIDIA Corp $186.55-0.60% TMUST-Mobile US Inc $186.630.32% Market News and Data brought to you by Benzinga APIs

SoftBank pauses talks to acquire data center operator Switch

SoftBank (SFTBY) (SFTBF) has paused discussions about acquiring U.S. data center operator Switch, a potential setback to founder Masayoshi Son's aim to roll out Stargate AI infrastructure, Bloomberg News reported, citing people with knowledge of the matter. Last month, it was SoftBank paused the Switch acquisition, impacting rollout of its Stargate AI infrastructure plans; full acquisition is now ruled out, with a partial investment or partnership under discussion. Switch is preparing for an IPO with backers considering around $60B valuation; ongoing SoftBank talks could influence this process and valuation, though acquisition is paused. Acquiring or partnering with Switch would have greatly supported SoftBank's Stargate project local AI data center infrastructure alongside OpenAI and Oracle; missing the deal is a potential setback.