(Jan 28): SoftBank Group Corp is in discussions to invest as much as US$30 billion ($37.82 billion) more in OpenAI, a sharp increase in commitment that reflects founder Masayoshi Son’s ambitions to play a central role in developing artificial intelligence (AI).
The Japanese company, already one of the ChatGPT-maker’s biggest backers, is in deliberations to commit more capital towards the fast-growing start-up, people familiar with the matter said. The maximum amount SoftBank is considering is US$30 billion, one of the people said, asking to remain anonymous to discuss private talks. They cautioned that the discussions are fluid and the amount of funding could change.
SoftBank’s shares jumped as much as 8.8% on the news, before paring gains to trade around 3.7% higher in Tokyo on Wednesday afternoon.
Son has been unwinding positions to increase SoftBank’s stake in OpenAI and ready capital for sweeping investments aimed at injecting AI in all devices. The Tokyo-based company sold its stake in Nvidia Corp and recently hit pause on talks to buy out US data centre operator Switch Inc. SoftBank had amassed an 11% stake in OpenAI, injecting US$22.5 billion just last month.
SoftBank representatives declined to comment on the prospective investment, which The Wall Street Journal first reported.
OpenAI chief executive officer Sam Altman has been meeting with top investors in the Middle East to line up funding for a new investment round that could total at least US$50 billion, people familiar with the matter have said. The ChatGPT maker is looking to raise US$50 billion or more in the round at a valuation of about US$750 billion to US$830 billion, the people said. The talks are early, and the amount could change.
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Japanese retail investors helped lift SoftBank’s shares to a record high last year, seeing them as a proxy for OpenAI. But ChatGPT’s outlook is less rosy now given rising competition from the likes of Google’s Gemini, said Amir Anvarzadeh, a Japanese equity strategist at Asymmetric Advisors. And yet, “Son is all in, betting the house on this”, he said.
Despite being early to invest in AI technologies, SoftBank has largely missed out on a global rush to build the semiconductors, server racks and other hardware to support machine learning, with the lion’s share of money flowing to a small circle of chipmakers including Nvidia and Taiwan Semiconductor Manufacturing Co (TSMC).
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SoftBank has sharply increased its bets in AI in recent months. Over the past year, the Tokyo-based company has bought US chip designer Ampere Computing LLC for US$6.5 billion and announced a US$5.4 billion acquisition of ABB Ltd’s robotics unit. To finance some of that cost, SoftBank has sold down its T-Mobile US Inc shares, unloaded its entire Nvidia stake and expanded a margin loan using its Arm shares.
SoftBank’s investments in AI, along with the sharp drop in the value of Arm shares at the end of last year, are heaping pressure on its creditworthiness, S&P Global Ratings warned earlier this month.
Still, SoftBank’s stock has been a “decent underperformer” in recent weeks, said Andrew Jackson, the head of Japanese equity strategy at Ortus Advisors. “As a high-beta laggard, it’s going to suck people in on headlines like this,” he said.
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