"Softbank CEO Masayoshi Son stood next to President Trump, OpenAI CEO Sam Altman, and Oracle (NASDAQ: ORCL) founder Larry Ellison when they announced the Stargate project in January. The plan was to invest $500 billion in data centers. Last month, Son upped its company's investment in OpenAI to $30 billion. He sold all of Softbank's Nvidia ( NASDAQ: NVDA) share ownership for $5.83 billion to help pay for that decision."
"The market has soured on Softbank's "all in" plan for AI infrastructures and AI software. Its stock is down 40% since October. It is hard to find a big-cap stock that, in recent years, has dropped so far so fast. Softbank faces several huge risks. The first is that it will need to go into debt to fulfill its investment commitments."
"Debt has become an increasingly significant part of data center construction. While it is likely that a massive number of these will need to be built to support AI use, that is not proven. It is an educated guess. OpenAI says it will not be profitable until 2028. To grow at the pace it plans, it will need hundreds of billions of dollars in additional investments."
Masayoshi Son increased Softbank's OpenAI stake to $30 billion and sold all Softbank's Nvidia shares for $5.83 billion to help fund the investment. Softbank joined a January Stargate initiative with major tech leaders planning $500 billion for data centers. Softbank's stock has fallen about 40% since October, with Bloomberg attributing much of the decline to the OpenAI exposure. The company may need to take on significant debt to meet data-center and other investment commitments. OpenAI projects no profitability until 2028 and will require hundreds of billions more to scale. Alphabet's Gemini 3.0 presents direct competition, leveraging Alphabet's large capital resources. Softbank's struggles may foreshadow reduced investor appetite for AI stocks.
Read at 24/7 Wall St.
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