SoftBank Group Corp.’s stock soared by 12% following its announcement of a monumental collaboration with OpenAI, Oracle Corp., and Abu Dhabi-backed MGX. The partnership aims to invest $500 billion in building data centers and infrastructure across the U.S. for OpenAI, the creator of ChatGPT. The company’s stock saw its largest intraday jump since August, fueled by SoftBank founder Masayoshi Son’s declaration that the four companies would form a joint venture with an initial $100 billion allocation toward infrastructure. The total investment could exceed $500 billion over the next four years, with plans to expand computing power. Major technology providers, including Microsoft Corp. and chipmaker Nvidia Corp., will contribute their expertise to the project.
In response to the announcement, Oracle saw a 4.6% uptick, while SoftBank’s chip-design subsidiary, Arm Holdings Plc, gained 4.8% in New York trading.
Paul Golding, an analyst at Macquarie, highlighted the significance of SoftBank’s involvement, noting that the conglomerate’s expertise in asset management and technology investments is highly regarded at this moment. He emphasized the perceived value of SoftBank’s assets in the context of the collaboration.
The news comes on the heels of Son’s prior commitment to invest $100 billion into the U.S. economy over the next four years. This pledge, made during a press event at Mar-a-Lago with former President Donald Trump, was expected to cover sectors including AI, data centers, semiconductors, and energy. It remains unclear whether the two announcements pertain to the same or different initiatives.
As SoftBank embarks on these massive financial undertakings, questions loom over how it will fund such vast projects. The company holds significant stakes in hundreds of startups, as well as a controlling 90% share in Arm, which it could potentially sell to finance its investments.
Bloomberg Intelligence Insight:
Bloomberg Intelligence suggests that SoftBank’s $500 billion investment in AI infrastructure via the Stargate joint venture with OpenAI, Oracle, and MGX could strain its loan-to-value ratio if external capital isn’t raised. With approximately $30 billion in available headroom under S&P’s 30% LTV limit, SoftBank has a history of managing leverage through asset sales, including the potential sale of its $140 billion-valued stake in Arm.
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