SoftBank’s OpenAI-Backed Loan Highlights Risks in Financing Strategy

If you’re one of those executives at Alphabet, Meta Platforms or Amazon who deals with investors, here’s an idea: Put a large photo of SoftBank CEO Masayoshi Son on the wall of your office. Next time a visiting investor complains about your AI spending, point to the photo. That should end the discussion.

As much as big tech firms are spending on AI, at least they’re financing much, if not most, of it through internally generated cash. SoftBank in contrast has so far spent $54.6 billion on OpenAI shares by raising money through a combination of various kinds of loans and asset sales. And it’s now gone even further: On Thursday, SoftBank revealed that this week it had borrowed $10 billion using its OpenAI stake as collateral. As SoftBank has committed to put a further $10 billion into OpenAI in October, there’s a good chance it will make that payment using money borrowed against other OpenAI shares.