SoftBank Scales Back Ambitious OpenAI-Backed Loan Amid Lender Skepticism on AI Valuations
In a significant adjustment to its aggressive AI investment strategy, SoftBank Group Corp. has reportedly reduced the size of a proposed loan backed by OpenAI’s assets from an initial target of $10 billion to $6 billion. This development, first reported by Bloomberg, underscores growing caution among financial institutions toward the lofty valuations of privately held artificial intelligence companies.
The loan, structured as a syndicated credit facility secured against OpenAI’s future revenue streams and other assets, was intended to provide SoftBank with substantial liquidity while betting on the explosive growth of generative AI technologies. OpenAI, the creator of ChatGPT and a pioneer in large language models, has seen its enterprise value soar in recent funding rounds, reportedly exceeding $150 billion in non-voting equity valuations. However, this deal marks a rare instance where SoftBank’s visionary CEO, Masayoshi Son, has had to temper expectations due to resistance from potential lenders.
Lenders’ reluctance stems primarily from concerns over the sustainability of private AI firms’ valuations in a maturing market. Publicly traded AI-related stocks, such as those of Nvidia and other chipmakers, have experienced sharp corrections following an initial boom driven by hype around generative AI. Investors and banks alike are now demanding more conservative multiples, questioning whether private entities like OpenAI can justify their premiums without transparent financial disclosures or proven profitability at scale. Bloomberg sources familiar with the negotiations indicated that initial commitments for the $10 billion facility fell short, prompting SoftBank to lower the ask to secure participation.
Several major Wall Street institutions are involved in the reworked $6 billion deal. JPMorgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley, and Bank of America Corp. have been approached as lead arrangers. Additionally, Citadel, the hedge fund giant led by Ken Griffin, is considering providing a portion of the financing, potentially in the form of a revolving credit line. These players bring expertise in syndicated loans but are applying stricter underwriting standards, including higher interest rates and tighter covenants to mitigate risks associated with unproven AI revenue models.
SoftBank’s pursuit of this financing aligns with its broader Vision Fund strategy, which has pivoted heavily toward AI following setbacks in other tech sectors. Masayoshi Son has publicly championed OpenAI as a cornerstone of the company’s AI ambitions, envisioning it as a key partner in deploying advanced AI infrastructure globally. The loan would enable SoftBank to fund data center expansions, chip acquisitions, and other capital-intensive projects without diluting its equity stakes. Yet, the reduction highlights a broader financing crunch for private AI ventures, where traditional debt markets are proving less accommodating than equity rounds fueled by venture capital.
This is not the first sign of cooling enthusiasm in AI lending. Earlier reports noted similar hesitancy in multibillion-dollar facilities for other AI startups, as banks grapple with regulatory scrutiny and the lack of comparable public market benchmarks. For OpenAI specifically, the collateral structure relies on projected subscription revenues from enterprise tools like GPT-4 and custom model deployments, but lenders seek assurances against competitive pressures from rivals such as Anthropic, Google DeepMind, and xAI.
The scaled-back deal, if finalized, would still represent one of the largest non-dilutive financings for a private tech company, signaling SoftBank’s resilience in navigating lender dynamics. Negotiations are ongoing, with expectations that the facility could close in the coming months at terms reflecting current market realities: likely in the mid-single-digit interest range with performance-based triggers.
This episode serves as a litmus test for the AI sector’s transition from speculative fervor to disciplined capital allocation. As private valuations face increasing pressure to align with public market realities, SoftBank’s adjustment may presage more grounded dealmaking ahead, ensuring that AI innovation is underpinned by sustainable financial engineering rather than unchecked optimism.
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