SoftBank and OpenAI: AI Charms but Concerns Creditors

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Key Takeaways

1SoftBank struggles to raise $6 billion, despite its stake in OpenAI, due to creditor reluctance.

2OpenAI, although valued at several hundred billion, remains private, complicating its use as collateral for a loan.

3An IPO for OpenAI could clarify its value, but creditors remain cautious in light of market uncertainties.

💡Why it matters — SoftBank's difficulty in raising funds highlights the growing financial challenges in the AI sector, despite its potential for innovation.

Context of SoftBank and OpenAI

SoftBank has made significant investments in OpenAI, supporting various infrastructure projects related to artificial intelligence. However, the Japanese group is facing unexpected obstacles. The main challenge is neither technological, regulatory, nor competitive, but financial. SoftBank is seeking to raise at least $6 billion through a loan secured by its stake in OpenAI. This funding need highlights a reality: the AI revolution is entering a phase where financing is as crucial as innovation.

Funding Difficulties

According to Bloomberg, SoftBank has suspended discussions with several potential creditors. Initially, the group aimed to raise $10 billion but had to revise this target down to $6 billion due to lenders' hesitations. This caution is surprising, especially since OpenAI recently filed for its IPO, which should have reassured the markets.

The contrast is even more striking given that SoftBank has regained the title of Japan's largest market capitalization, surpassing Toyota. Its stake in ARM has benefited from the surge in AI-related stocks, generating significant unrealized gains on OpenAI. Yet, despite this favorable context, converting these assets into several billion dollars of debt has proven more complex than anticipated.

Valuation of OpenAI

The crux of the problem lies in the very nature of the asset used as collateral. A margin loan allows an investor to borrow against a financial asset, but the amount granted depends on the estimated value of the collateral. This mechanism is common for publicly traded stocks, where banks can continuously observe their market price, measure their liquidity, and adjust their risks.

However, OpenAI does not meet any of these criteria. Despite its valuation of several hundred billion dollars, the company remains private. Its price is only known through successive funding rounds or limited secondary transactions. Creditors must therefore rely on estimates rather than a liquid and transparent market.

This difficulty is compounded by the unique structure of the company. OpenAI does not resemble a typical publicly traded tech company or a traditional financial asset. The governance mechanisms, the economic rights associated with investors, and the constraints specific to the organization make the valuation exercise more complex for lenders.

Thus, SoftBank's stake in OpenAI is likely one of the most sought-after assets in the global tech market, but also one of the most challenging to use as bank collateral.

Uncertainties Surrounding the IPO

The announcement of OpenAI's IPO filing has nonetheless changed the discussions. Until now, banks faced an uncertain horizon. Now, creditors can anticipate the emergence of a market price, a float, and a gradual ability to resell shares.

However, this does not seem to resolve all questions. Banks still need to assess the effective valuation that will be adopted at the IPO, the market depth post-listing, and the stability of the stock in the months that follow. The excesses observed during previous tech waves have left lasting scars on credit teams.

The experiences of WeWork or certain overvalued IPOs remind us that a company's private valuation does not always equate to realizable value in public markets, which has left more than one creditor wary.

Evolution of the Competitive Landscape

Lenders' hesitations also reflect an evolution in the competitive landscape of artificial intelligence. Just two years ago, OpenAI appeared to be the almost undisputed winner in the race for generative models. Since then, the situation has become more complex.

Anthropic has established itself as a credible competitor among major companies.
Google continues to invest heavily in Gemini.
Meta is accelerating its developments.
xAI is continuing its rise.
Several specialized players are emerging in vertical segments.

For a venture capital investor, this competition can be seen as a driver of innovation, but for a creditor, it represents an additional risk factor.

The future value of OpenAI's stake directly depends on its ability to maintain its technological lead, retain its market share, and convert its growth into sustainable cash flows, all of which are difficult parameters to project over a decade.

Financial Stakes for SoftBank

The slowdown in this financing comes at a particular time for SoftBank, which must face the maturity of a $40 billion bridge financing used to support its investments in OpenAI. This debt matures in March 2027.

The operation currently under consideration is therefore not merely an opportunistic refinancing but is part of a broader strategy aimed at securing the financial resources necessary to pursue Masayoshi Son's ambitions in artificial intelligence.

SoftBank is participating in discussions around Stargate in the United States and also plans to invest up to €75 billion in data center infrastructure in France. Through ARM, it remains exposed to the entire value chain of high-performance computing. Each new initiative mechanically increases financing needs.

AI as a Balance Sheet Industry

After being primarily funded by venture capital, the artificial intelligence industry is entering a new phase where its capital needs are more akin to those of infrastructure than to those of software. Building a multi-gigawatt data center campus requires tens of billions of dollars in investment. Deploying hundreds of thousands of specialized processors, securing access to energy, and developing associated networks now mobilize amounts comparable to those invested in electricity, telecommunications, or transportation sectors.

AI players are thus entering a realm historically dominated by banks, insurers, infrastructure funds, and pension funds.

Future Outlook

While the slowdown in the loan secured by SoftBank's stake in OpenAI does not undermine the company's prospects or those of the artificial intelligence market, it does represent an important signal.

The next decade could see the emergence of a different category of winners than those observed so far. Alongside OpenAI, Anthropic, or NVIDIA, the true beneficiaries of the AI revolution could also be the institutions capable of organizing and financing the trillions of dollars in investments necessary for its deployment.