OpenAI's move to raise another $40 billion at a $300 billion valuation is being funded by Softbank, which in turn is paying for its bet with a lot of leverage.
Should we be worried about the amount of debt being floated to build out AI infrastructure? Not yet. But remember that debt is swell until it isn't.
Softbank said it will fund a $10 billion investment in OpenAI via a loan from Mizuho Bank. Softbank would wind up investing $40 billion in OpenAI in early 2026 only if the ChatGPT maker can convert into a for-profit structure.
Recall that SoftBank has already pledged $100 billion for the Stargate data center buildout with OpenAI. Softbank also recently said it would buy Ampere for $6.5 billion.
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SoftBank has a long history of raising debt, scaling bets and then getting squeezed later.
Now if this were just a tale of SoftBank's debt adventures that would be one thing. But leverage is being used to fund AI infrastructure in multiple areas.
CoreWeave's IPO is another example of the power and peril of debt. CoreWeave's IPO was downsized due to concerns about it breaking debt covenants for Blackstone funding. CoreWeave stumbled out of the gate, traded below its IPO price and has just now moved ahead of the $40 mark.
The issue with CoreWeave is that it has $12.9 billion in debt commitments as of Dec. 31 on revenue of $1.92 billion. CoreWeave CEO Michael Intrator told CNBC that "debt is the engine, it's the fuel for this company."
CoreWeave rival Nebius has a bit more than $6 billion in debt.
Blackrock's AI Infrastructure Partnership push adds private equity to the mix including plans to "mobilize up to $100 billion in total investment potential when including debt financing."
This leverage bet works out great as long as AI factory demand remains insatiable. Should this demand even pause there could be debt pileups everywhere. History says this debt pileup will matter at some point.
