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A 69-year-old man, who recently borrowed tens of billions of dollars, has poured almost all of it into Open AI. This isn't the first time he's played big. He is Masayoshi Son, the founder of SoftBank. Last June, before all shareholders, he announced that SoftBank would go all-in on Open AI, the company behind ChatGPT.
And he actually did it. To date, SoftBank's total commitment to Open AI amounts to approximately $64.6 billion, in exchange for about 13% of the shares. Furthermore, he also chairs the Stargate project, a $500 billion AI infrastructure development plan. But where will the money come from? First, he sold all of his Nvidia stock, raking in over $5.8 billion.
Not enough. In March of this year, SoftBank borrowed a $40 billion bridge loan from major banks. That's still not enough. In August, he mortgaged his Open AI shares to borrow an additional 10 billion VND, with a clause requiring him to repay the loan early if the share price plummeted. Then in September, SoftBank issued the largest tranche of junk bonds in its history, worth $11.1 billion, with the highest interest rate reaching 9.75% per year.
In short, a very large portion of this gamble is being wagered with borrowed money. To put it simply, he's mortgaging his entire house to bet on a game of chance . To understand why he dared to play that way, we have to go back to the beginning. Masayoshi Son was born in Jiam, a slum on the island of Kyushu, Japan, in 1957.
My paternal grandparents came from South Korea. My grandfather was a miner. His father raised pigs and chickens, and did all sorts of jobs to support the whole family. Son grew up in poverty and was of Korean descent living in Japan. After being advised by Den Fujita, the man who introduced McDonald's to Japan, to learn English and pay attention to computers.
At the age of 16, he went to California alone. At the University of Berkeley, he invented a pocket-sized electronic translator and sold it to Sharp for $1.7 million before graduating. In 1981, he returned to his home country and founded SoftBank. Initially, it was just a software distribution company.
No bank would lend them money. Mr. Tarashi Sasaki, a veteran executive at Sharp, mortgaged his own house to bail him out. That means, with his very first loan, he gambled away someone else's house. Legend has it that, right from the start, he stood on a shipping crate and told his employees, "The company will be worth trillions of yen." Then, at the age of 24, he discovered he had hepatitis B.
The doctor said he only had 3 to 5 years to live. He recovered thanks to a new treatment method. Then the internet arrived. In 1995, he bought shares in Yahoo when the company was still very small. In 2000, he invested $20 million in a Chinese startup called Alibaba. Fourteen years later, that amount is worth approximately $75 billion.
But in 2000, the dot-com bubble burst, SoftBank's stock plummeted, and he lost over $59 billion. With that much money lost, an average person would probably go back to their hometown and raise pigs. And what about Masa? He took out more loans to buy an entire telecommunications company. In 2006, SoftBank acquired Vodafone Japan for approximately 1.75 trillion yen, or about $15 billion.
It was the largest acquisition financed by debt in Japan at the time. Even before the iPhone was released, he met with Steve Jobs to request the right to sell the phone in Japan. In 2008, SoftBank became the exclusive carrier selling iPhones in Japan. From a latecomer, it has risen to become one of the largest mobile network operators in the country.
Having achieved great success, he went to America again. In 2013, SoftBank spent $21.6 billion to acquire 78% of Sprint. This time things didn't go so smoothly. In the middle of summer 2016, while bankers were still on holiday, he finalized the deal to acquire ARM, the British chip design company, for over $31 billion.
The following year, he established Vision Fund, a $100 billion technology investment fund, investing in a range of startups. The biggest loser was WeWork, valued at $47 billion in 2019, which went bankrupt in 2023. SoftBank lost approximately $14 billion . The bright spot is ARM. In 2023, ARM went public with a valuation of $54.5 billion.
If you win, you'll be like Alibaba; if you lose, you'll be like WeWork. Masa never gambled small. And now, he's betting the biggest gamble of his life on AI. The problem is that this time, a very large portion of the stake is borrowed money, and interest still has to be paid, whether the AI market is doing well or badly.
In June of this year, SoftBank surpassed Toyota in market capitalization. Four months later, that value had dropped by about half. This month alone, the stock has fallen by more than 30%. SoftBank's default insurance premiums have reached their highest level in nearly four years. There are reports that he is seeking an additional $100 billion from Gulf states.
And ironically, Mr. Son himself, earlier this month, also spoke out to warn that super-intelligent artificial intelligence could become super- dangerous. Genius or gambler? For Masa, the answer usually takes 10 years. What do you think? Leave a comment!
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