In today’s Cloud Wars Minute, I look at why SoftBank is turning to the bond market to finance its latest $10 billion OpenAI investment.
Highlights
00:03 — It’s fair to say that we’re at an interesting inflection point when it comes to how AI innovation is set to progress, what might constrain it, and where, eventually, lines may be drawn. However, that hasn’t slowed planned investment in some of the biggest U.S. firms.
00:19 — Most recently, Japanese investment giant SoftBank has announced that, through the issuance of senior unsecured bonds, it will be borrowing over $11 billion to help fund its planned $10 billion investment in OpenAI. Now, $10 billion of the new bonds will be issued in U.S. dollars, with another 1 billion issued in euros.
00:41 — This is SoftBank’s third tranche of its follow-on investment in OpenAI, with the $10 billion payment expected to close on October 1. It’s a very significant amount, and if the bond sale is completed at this planned size, it will be the largest corporate bond deal by a non-financial company ever recorded in Asia Pacific and Japan.
01:03 — Now, quick note here: despite its name, SoftBank isn’t a bank. It’s primarily an investment holding company and tech investor. I think the interesting thing here is that SoftBank isn’t just investing $10 billion of spare cash into OpenAI; it’s borrowing billions from the bond market to help fund the investment.
01:27 — Effectively using debt to finance this continued relationship with OpenAI, at the very least, signals a significant level of confidence in the company.
