SoftBank Borrowed Another 11.9 Billion Dollars to Keep Funding OpenAI, and Its Shares Fell 13 Per Cent the Same Day

There are two markets for Masayoshi Son's conviction, and on Monday they disagreed. In the private one, about twenty banks committed 11.87 billion dollars to a two-year loan that SoftBank had gone out to raise at 10 billion, according to Bloomberg and the Japan Times. In the public one, SoftBank Group's shares fell as much as 13 per cent in Tokyo, the steepest single-day drop since 17 July, as AI-linked stocks sold off worldwide.

What the money is for

The loan, sealed last week, does two jobs. It repays 25.9 billion dollars of an earlier bridge facility that falls due on 15 September, and it carries SoftBank towards an investment in OpenAI that is slated to reach close to 65 billion dollars by October. That is the largest single commitment any investor has made to any private company, and SoftBank is making it with borrowed money against a stake in a business that has, as of this week, postponed its own listing to 2027, according to reports carried by Yahoo Finance on Monday. The banks' willingness to lend more than was asked tells you what they think of the collateral. The share price tells you what everyone else thinks of the timing.

Why Monday

The timing was not SoftBank's. Over the weekend Anthropic's chief executive, Dario Amodei, called on the industry to slow the pace of capability improvements, and Sam Altman of OpenAI and Elon Musk agreed with him in public, which we cover separately. Whatever that means for safety, it means something quite specific for a company whose value is a leveraged bet on how fast OpenAI grows: if the frontier slows, the revenue curve that justifies 65 billion dollars slows with it, and the debt does not. Nvidia lost two per cent on Monday, the memory makers six, and SoftBank, which owns Arm and is the largest outside funder of the largest model lab, lost thirteen. It is the purest expression of the AI trade on any exchange, in both directions.

The Gulf angle

SoftBank's history in this region is the Vision Fund, in which Saudi Arabia's Public Investment Fund and Abu Dhabi's Mubadala put up most of the money and took most of the write-downs when WeWork and its cousins failed. The OpenAI bet is structured differently, on SoftBank's own balance sheet with bank debt rather than sovereign equity, which is why the banks matter more this time than the sovereign funds. But the question the Gulf funds asked in 2019, whether Son's judgment about a founder is worth the leverage he puts behind it, is the one the Tokyo market asked on Monday, and it is worth remembering that the last time the answer was no, it took three years to arrive.

None of this makes the bet wrong. OpenAI's revenue has grown faster than any company in history, and the Oracle results last week, which sent Dell and HPE to records, were a reminder that the demand for the infrastructure is real and contracted. But there is a difference between believing in a company and borrowing 65 billion dollars to own a piece of it, and on Monday, for the first time in a while, the market priced the difference.