SoftBank in Talks for $25B OpenAI Investment - Latest News

SoftBank Considers Major Investment in OpenAI

SoftBank is currently engaged in discussions regarding a potential investment of up to $25 billion in OpenAI. This is envisioned as part of a larger collaborative effort.

The broader partnership could result in the Japanese conglomerate allocating over $40 billion towards AI initiatives alongside the Microsoft-supported startup, as reported by the Financial Times.

Potential Investment Details

Should the investment materialize, SoftBank would become OpenAI’s largest individual investor. This would surpass Microsoft, who initially invested in the creators of ChatGPT back in 2019.

This development follows a joint announcement from both companies last week. They committed to investing $100 billion in Stargate, a U.S. data center project for OpenAI, with potential for expansion to $500 billion over a four-year period.

Stargate and Infrastructure Funding

SoftBank intends to directly invest between $15 billion and $25 billion into OpenAI, in addition to its $15 billion commitment to Stargate.

OpenAI is expected to contribute approximately $15 billion to Stargate, and SoftBank’s equity investment could potentially cover OpenAI’s infrastructure obligations.

Market Reactions and Competitive Landscape

These talks are occurring concurrently with the release of DeepSeek’s R1 “reasoning” model by a Chinese firm. This model, developed with a comparatively modest budget, caused some disruption in public markets earlier this week.

Nvidia experienced a significant market fluctuation, losing as much as $589 billion in value before a partial recovery. Investors expressed concerns that substantial investments in costly AI hardware might not be essential if comparable outcomes could be achieved with fewer resources.

Allegations of Model Distillation

OpenAI recently asserted that it has uncovered evidence suggesting DeepSeek utilized OpenAI’s proprietary models to train R1 and other models. This was allegedly done through a process known as “distillation.”

This technique enables developers to attain similar performance levels with smaller models at a considerably reduced cost. OpenAI maintains that this practice would be a violation of its terms of service, which explicitly prohibit the use of its outputs for the development of competing models.

Strategic Implications

The prospective agreement between OpenAI and SoftBank, which the Financial Times notes is not yet finalized, represents Masayoshi Son, SoftBank’s founder, largest investment since the $16 billion injection into WeWork.

Furthermore, it would lessen OpenAI’s reliance on Microsoft for computing resources. Microsoft recently agreed to relinquish its position as OpenAI’s exclusive cloud provider.

Funding Structure and Future Plans

Approximately 20% of Stargate’s funding is anticipated to come from equity, with the remaining portion financed through debt secured against assets and cash flow.

OpenAI, which achieved a $157 billion valuation last year, is also in negotiations to transition into a for-profit entity. This change would facilitate further fundraising efforts.