SoftBank's Stargate Project: A Test of Financial Engineering

SoftBank and OpenAI's $500 billion data-centre project, Stargate, relies heavily on debt financing, with the majority of the funds to be borrowed. The project's feasibility has been questioned due to the lack of a creditworthy guarantor like Microsoft. However, SoftBank could leverage its own assets and those of its investors to cover a significant portion of the debt. The project's success depends on the ability to raise substantial debt funding.

The much-anticipated collaboration between SoftBank, OpenAI, and other industry giants, known as the Stargate Project, aims to invest a staggering $500 billion over the next four years to build new AI infrastructure in the United States [1]. This initiative, which was officially announced at a White House press conference, has garnered significant attention due to its ambitious scope and reliance on debt financing [1][2].

While SoftBank, OpenAI, and Oracle have been named as initial equity funders, the bulk of the financing for this project is expected to come from debt [2]. The feasibility of this massive undertaking has been called into question due to the lack of a creditworthy guarantor like Microsoft, which has already established a strong partnership with OpenAI [1]. However, SoftBank could potentially leverage its own assets and those of its investors to cover a considerable portion of the debt [2].

The success of the Stargate Project hinges on its ability to secure substantial debt financing. The project is expected to create hundreds of thousands of American jobs, secure American leadership in AI, and generate massive economic benefits for the world [2]. Furthermore, it will support the re-industrialization of the United States and provide a strategic capability to protect national security [2].

Reports indicate that SoftBank and OpenAI are the lead partners for Stargate, with SoftBank having financial responsibility and OpenAI having operational control [2]. The initial tech partners for the project include Arm, Microsoft, NVIDIA, and Oracle, with construction already underway in Texas [1]. Microsoft's partnership with OpenAI, which was announced prior to the Stargate Project, includes access to OpenAI's IP, revenue sharing arrangements, and exclusivity on OpenAI's APIs until 2030 [1]. However, Microsoft now has a right of first refusal over OpenAI building new capacity [1].

In conclusion, the Stargate Project, a $500 billion AI data-center initiative, faces challenges in securing substantial debt financing due to the lack of a creditworthy guarantor. However, SoftBank and its partners are confident in the project's potential to create jobs, secure American leadership in AI, and generate significant economic benefits.

References:
[1] The Verge. (2025, January 21). SoftBank, OpenAI, and Oracle reveal $500 billion AI infrastructure project, The Stargate Project. https://www.theverge.com/2025/1/21/24348816/openai-softbank-ai-data-center-stargate-project
[2] SoftBank Group. (2025, January 22). SoftBank, OpenAI, Oracle, and MGX Announce The Stargate Project, a New $500 Billion Company to Build New AI Infrastructure for OpenAI in the United States. https://group.softbank/en/news/press/20250122