SoftBank scrambles to deliver $22.5 billion to OpenAI as year-end deadline looms

SoftBank faces urgent deadline for OpenAI commitment

SoftBank is racing against the clock to secure a $22.5 billion funding commitment to OpenAI by the end of 2025, marking one of the most aggressive moves yet by CEO Masayoshi Son in the AI funding race 1

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. The Japanese tech conglomerate's scramble offers a revealing look at the financial strain faced by even the world's largest investors as they attempt to finance ambitious AI data centers worth hundreds of billions of dollars 4

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OpenAI has not yet received the remaining funding but expects the money to arrive by year-end as stipulated in their contract 4

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. SoftBank agreed in April to invest up to $30 billion in OpenAI at a $300 billion valuation, with $10 billion delivered that same month 4

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. The remaining payment was contingent on the AI startup transitioning to a for-profit entity by year-end, an ambitious feat that OpenAI achieved in October 1

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Masayoshi Son liquidates major assets for AI bet

To come up with the money, Masayoshi Son has already taken drastic measures. SoftBank has sold its entire $5.8 billion stake in AI chip leader Nvidia, offloaded $4.8 billion of its T-Mobile US stake, and slashed staff 3

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Son has slowed most other dealmaking at SoftBank's Vision Fund to a crawl, and any deal above $50 million now requires his explicit approval 3

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Despite these moves, SoftBank still has multiple sources of capital it could tap. The company recently expanded its margin loan capacity by $6.5 billion, bringing total undrawn capacity to $11.5 billion in margin loans borrowed against its ownership of British semiconductor firm Arm Holdings 4

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. Arm's stock has tripled from its IPO price, providing SoftBank with additional collateral headroom to expand its borrowing capacity 4

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SoftBank reported parent-level cash reserves of 4.2 trillion yen, approximately $27.16 billion, as of September 30 4

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. The group still owns about 4% of T-Mobile US, valued at roughly $11 billion at the end of September 4

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Stargate initiative drives infrastructure development

SoftBank is one of OpenAI's principal financiers in the $500 billion Stargate initiative announced during a White House appearance nearly a year ago alongside Oracle and Abu Dhabi-based investment firm MGX 1

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. The ambitious infrastructure development aims to build dozens of AI data centers for training and inference across the U.S. and other nations, furthering the advancement of Artificial General Intelligence 2

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Whether OpenAI and its partners could actually deliver on plans to invest up to $500 billion has been a point of contention. Shortly after the Stargate initiative was announced, former OpenAI co-founder and Tesla CEO Elon Musk questioned whether any of them actually had the money required 1

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. Oracle has pushed ahead with massive infrastructure development on OpenAI's behalf, borrowing heavily to do it 1

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. The first of the datacenters, Stargate's flagship facility in Abilene, Texas, became partially operational earlier this year, which means Oracle will expect payments from OpenAI for its services before long 1

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OpenAI valuation soars amid competitive pressure

Son has strong reasons to fulfill these obligations. Since SoftBank secured a deal to invest in OpenAI at a $300 billion valuation in April, the valuation has risen dramatically 4

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. The company is now in talks to raise additional funding from investors, including Amazon, potentially tripling its valuation to close to $900 billion, which would give SoftBank a significant paper gain once the transaction is completed 5

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The new funding is crucial for covering OpenAI's rising costs for AI model training and running its models as competition from Google ratchets up 4

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. OpenAI CEO Sam Altman recently told employees that the company is now in a "code red" phase, delaying other projects to focus on improving ChatGPT to surpass the capabilities of Google's Gemini 2

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. Altman has said OpenAI wants 30 gigawatts of compute capacity for $1.4 trillion and has described a goal of adding one gigawatt each week 5

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Additional funding sources under consideration

SoftBank's firm is working to take public its payments app operator, PayPay. The initial public offering, originally expected this month, was pushed back due to the 43-day-long U.S. government shutdown, which ended in November 3

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. PayPay's market debut, likely to raise more than $20 billion, is now expected in the first quarter of next year 3

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The Japanese conglomerate is also looking to cash out some of its holdings in Didi Global, the operator of China's dominant ride-hailing platform, which is looking to list its shares in Hong Kong after a regulatory crackdown forced it to delist in the U.S. in 2021 4

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. Investment managers at SoftBank's Vision Fund are being directed toward the OpenAI deal 4

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. Despite investing at a less active pace, SoftBank has continued to back AI startups such as Sierra and Skild AI 4

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