SoftBank Group has secured an $11.87 billion loan to support its massive investment in OpenAI, people familiar with the matter said, as the Japanese conglomerate continues to ramp up its financial commitment to the artificial intelligence company.
The two-year financing facility was finalized last week and attracted commitments from around 20 banks. The latest borrowing is larger than SoftBank’s earlier target of $10 billion, highlighting the scale of funding required to finance its growing OpenAI bet.
SoftBank has not commented on the financing.
Credits: Fox Business
SoftBank expands borrowing for OpenAI bet
The latest loan adds to a growing pile of debt raised by SoftBank to fund its investment in OpenAI. The company has increasingly turned to loans and other financing arrangements as billionaire founder and CEO Masayoshi Son doubles down on artificial intelligence.
SoftBank has already secured a $10 billion margin loan backed by its stake in OpenAI. The conglomerate is also considering a US dollar-denominated junk-bond sale that could raise between $10 billion and $20 billion.
The borrowing spree comes as investors become increasingly focused on the financial risks surrounding the AI boom. With technology companies committing enormous sums to AI infrastructure, models and data centers, concerns are growing about whether the expected returns will justify the level of investment and leverage involved.
SoftBank to repay $25.9 billion loan
SoftBank is also preparing to repay a significant portion of another loan that was raised to finance its OpenAI investment.
The company said last week that it would repay the outstanding balance of a $40 billion loan obtained earlier this year. SoftBank plans to pay down $25.9 billion on September 15, according to the company.
The non-collateralized loan was originally scheduled to mature in March next year. Repaying the balance could help reduce some of the near-term pressure created by SoftBank’s aggressive financing strategy, even as the company continues to raise new debt for its AI investments.
SoftBank has also raised substantial amounts through bond sales and other loans this year. Including the latest facility, the company has raised the equivalent of around $37 billion from offshore and domestic bond sales and loans so far this year, according to Bloomberg-compiled data.
Junk-bond sale could raise up to $20 billion
SoftBank is now preparing to test investor appetite for another major fundraising exercise. The company is scheduled to meet investors in New York this week to gauge interest in a potential US dollar junk-bond offering.
The proposed sale could raise between $10 billion and $20 billion, people familiar with the matter said. The size and pricing of the offering will likely provide investors with another indication of how comfortable markets are with SoftBank’s expanding exposure to AI.
The potential bond sale comes at a particularly sensitive time for the sector, with investors increasingly examining the credit risks associated with companies and investment vehicles tied to artificial intelligence.
Credits: The Hindu
SoftBank shares fall sharply
SoftBank’s aggressive AI strategy has also weighed on its stock. Shares fell as much as 13% on Monday, marking their steepest intraday decline since July 17.
The market reaction reflects growing concerns over the amount of capital SoftBank is committing to OpenAI and the debt being used to finance that commitment.
SoftBank is slated to invest close to $65 billion in OpenAI by October, making the AI company one of the most significant bets in the Japanese conglomerate’s portfolio.
At the same time, concerns about the risks of rapidly advancing AI are becoming more prominent. Some technology executives have argued that the industry should slow the pace of AI development because of escalating safety risks.
OpenAI CEO Sam Altman also said in an interview with Fortune that the company would not proceed with a public offering this year as it continues to address safety-related concerns.
For SoftBank, however, the financial commitment to OpenAI continues to grow. With billions being raised through loans and bonds, investors will now be watching closely to see whether the company’s AI strategy can generate returns large enough to justify its unprecedented scale of investment.
