SoftBank Group Corp. is contemplating a significant shift in its approach to funding the ambitious $500 billion artificial intelligence venture known as the Stargate Project. This AI initiative, launched with OpenAI, promises to revolutionize the computing landscape with the construction of vast data centers and power generation facilities across the United States. However, the Japanese tech giant, led by founder Masayoshi Son, is currently exploring various financing strategies to bring this massive plan to fruition.
The company is considering leveraging a financing model often associated with large infrastructure projects, such as oil and gas ventures, according to sources familiar with the matter. This approach, known as project financing, is a technique that allows companies to fund capital-intensive projects with less upfront investment, relying instead on long-term debt secured against expected future cash flows. For a project of Stargate’s scale, which is poised to become one of the largest-ever builds in terms of computing power, this model could be crucial.
Under this proposed structure, SoftBank, OpenAI, and their partners—including Oracle Corp. and Abu Dhabi’s MGX—are expected to contribute around 10% of the overall project cost in equity. The rest would be financed through debt, sources suggest, as SoftBank continues to negotiate with additional potential investors. These equity stakes, when combined, could be valued at approximately $50 billion, with each major partner contributing substantial portions of that sum.
The Stargate Project, announced with great fanfare, plans to develop tens of gigawatts of data center capacity, making it a crucial player in the rapidly evolving AI ecosystem. SoftBank has already broken ground on its first data center in Abilene, Texas, and is evaluating other locations across the U.S. While the company initially committed to spending $100 billion in the near term, it has yet to finalize the funding structure, signaling that more partners may be involved as the initiative progresses.
A key factor complicating the financing of Stargate is the growing competition from Chinese AI startup DeepSeek, which has gained attention for offering low-cost, open-source AI technology. Additionally, OpenAI is facing an unsolicited acquisition offer from Tesla CEO Elon Musk, adding another layer of uncertainty to the project’s financial strategy.
Despite these challenges, SoftBank’s proposed financing structure would rely heavily on debt, with additional capital potentially coming from a mix of preferred equity and mezzanine debt. This approach mirrors those used in other infrastructure sectors, such as pipelines and telecommunications networks. The combination of SoftBank’s access to low-interest financing from Japan and its strong bond market presence may help mitigate some of the risks associated with the high-leverage model.
The success of the Stargate project depends largely on its ability to generate sufficient revenue from AI services, but with cash flows still uncertain, the financing model remains fluid. In the meantime, SoftBank is working to secure further investment from institutional players to create a more resilient capital base for the initiative.
While SoftBank’s plans for Stargate move forward, they come at a time when the broader AI sector is experiencing dramatic shifts. Companies like Nvidia-backed CoreWeave are turning to new financing methods, such as using graphic processing units as collateral for loans, to fund their own massive data center projects. These models rely on the assumption that AI hardware will maintain its value, though that premise is being tested by the rise of DeepSeek’s cost-effective alternatives.
As SoftBank grapples with its financing strategy, questions remain about whether the high-debt structure will prove viable, especially given the rapidly evolving and highly competitive nature of the AI market. Nonetheless, the venture represents one of the most significant moves in the tech industry, and its success could reshape the landscape of artificial intelligence for years to come.
SoftBank’s most recent financial performance also adds a layer of complexity to its ambitious plans. The company is expected to report a loss of around ¥155 billion ($1 billion) for its fiscal third quarter, while its Vision Fund has faced challenges with the valuation of its public portfolio. Meanwhile, SoftBank’s other investments, including high-profile startups like ByteDance, are also under pressure, further intensifying the need for a solid and sustainable financial plan for the Stargate project.
The coming months will likely reveal whether SoftBank’s bold financing strategy can succeed in delivering on its $500 billion AI dream, or if external market forces and internal uncertainties will lead to a rethinking of the approach.
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