Sell all Nvidia, mortgage Arm to leverage! SoftBank bets everything on OpenAI, striving to secure funding by the end of the year

SoftBank Group and its founder Masayoshi Son are aggressively raising funds through large-scale asset disposals and debt financing to fulfill their massive investment commitment to OpenAI.

On December 19th, according to Reuters, sources revealed that SoftBank is racing against time to complete the $22.5 billion financing commitment to OpenAI that remains unpaid by the end of this year. To raise the necessary funds, Masayoshi Son has taken a series of radical measures, including selling all of SoftBank's shares in AI chip leader NVIDIA worth $5.8 billion and offloading $4.8 billion worth of T-Mobile US shares.

Additionally, it has been reported that sources indicated SoftBank may tap into the unutilized margin loans obtained by mortgaging its shares in chip design company Arm Holdings.

Analysts believe that this financing sprint not only highlights SoftBank's ambitions in the AI sector but also provides a window for the market to observe the immense capital pressures faced by the world's top dealmakers in the trillion-dollar AI infrastructure race.

Although the contract stipulates that the funds must be in place by the end of 2025, SoftBank is accelerating this process internally. Besides liquidating assets, Masayoshi Son has significantly slowed down other transaction activities of the Vision Fund, with any deal exceeding $50 million now requiring his explicit approval.

Asset Liquidation and Financing Channels Fully Open

To ensure that this "bet" funding for OpenAI is secured, SoftBank is operating on multiple fronts, utilizing cash, publicly traded stocks, and debt instruments on its balance sheet for financing.

In terms of specific asset disposals, in addition to liquidating NVIDIA and reducing its stake in T-Mobile US, SoftBank has also cut its workforce to control costs.

Reports indicate that investment managers of the Vision Fund have been instructed to shift their focus entirely to the OpenAI deal.

Regarding potential liquidity sources, SoftBank is planning to take its payment application PayPay public. According to insiders, the initial public offering (IPO) of PayPay was initially expected to take place this month but was delayed due to the previous 43-day U.S. government shutdown.

Currently, PayPay's market debut is expected to occur in the first quarter of next year, with a fundraising scale potentially exceeding $20 billion. Additionally, SoftBank is seeking to cash out some of its holdings as Chinese ride-hailing giant Didi Global plans to list in Hong Kong.

Mortgaging Arm: A Key Financing Lever

A major funding pool currently available to SoftBank comes from margin loans obtained by mortgaging its shares in Arm Holdings.

Reports indicate that sources have revealed that SoftBank has recently increased the limit of this margin loan by $6.5 billion, bringing the total unutilized financing capacity to $11.5 billion. Since its IPO, Arm's stock price has tripled, providing SoftBank with significant additional collateral space, allowing it to obtain liquidity by expanding its borrowing capacity without directly selling this core asset.

OpenAI's Funding Thirst

The important driving force behind Masayoshi Son's urgency to utilize various financing mechanisms to complete the investment is the astonishing growth in OpenAI's valuation.

In April of this year, SoftBank locked in an investment agreement with OpenAI at a valuation of $300 billion, committing to a total investment of up to $30 billion, of which $10 billion was paid in that month. The payment of the remaining amount is contingent upon OpenAI transforming into a for-profit company by the end of the year.

Reports indicate that, according to informed sources, OpenAI's valuation has significantly increased since the April agreement was signed. Currently, the company is negotiating with investors, including Amazon, and its valuation may approach $900 billion. This means that once the deal is completed, SoftBank will immediately realize substantial paper gains.

For OpenAI, this new funding is crucial. As competition from Alphabet's Google intensifies, OpenAI is facing skyrocketing costs for training and running AI models.

OpenAI CEO Sam Altman stated in October that OpenAI aims to spend $1.4 trillion to build 30GW of computing power, ultimately hoping to increase its computing capacity by 1GW per week.

Given that the current capital cost per GW exceeds $40 billion, the funding requirement for this goal is extremely large