SoftBank leads the investment in Interstellar Gate, where will the 500 billion US dollars come from?

A few weeks ago, SoftBank founder Masayoshi Son, together with US President Donald Trump, unveiled the Stargate Project, an artificial intelligence project in collaboration with OpenAI that could cost $500 billion or more. Now, Son is considering how to pay for this expense. According to sources, the Japanese billionaire is exploring a financing technique known as project financing, sometimes associated with oil and gas projects. This strategy is used for capital-intensive large infrastructure projects, such as the Alaska oil pipeline project. One advantage is that it usually requires less upfront capital from investors and can be financed long-term based on the expected cash flow of the project. Sources revealed that SoftBank is exploring incorporating aspects of this financing structure into the funding of the Stargate project, which will involve multiple data centers and power generation projects. One proposed plan under discussion is for SoftBank, OpenAI, along with partners Oracle Corporation and MGX in Abu Dhabi, to contribute around 10% of the total cost, with the majority of funds raised through the bond market. Last month, SoftBank and OpenAI boldly announced plans to build tens of gigawatts of data center capacity, potentially the largest computing deployment in history. In addition to breaking ground on the first data center site in Abilene, Texas, Stargate is looking to select more sites and focus on additional projects in over a dozen other states. Son told Trump that the project would cost $100 billion immediately. However, for much of the Stargate project, SoftBank has yet to determine the source of the needed funds and is discussing bringing in more stakeholders. The rise of low-cost and open-source artificial intelligence from Chinese startup DeepSeek is making the future technology provider landscape more competitive and less profitable, and these discussions are still in the early stages. OpenAI also faces a proposed takeover led by Elon Musk, adding further uncertainty to the financing plan for Stargate. In theory, if SoftBank and OpenAI have equal stakes in Stargate, with Oracle Corporation and MGX holding smaller stakes, the two companies collectively owning 10% of Stargate could amount to around $50 billion, with SoftBank and OpenAI each contributing $15 billion to just under $25 billion. In practice, Stargate will consist of a series of multi-billion-dollar projects. Some sources say that apart from the equity pool, most of the financing will be done on a project-by-project basis. According to sources, the financial structure of the project is very complex. Earlier reports also mentioned that SoftBank plans to keep its total equity exposure to Stargate at around 10% and utilize project financing structure on a project-by-project basis. SoftBank, responsible for financing Stargate, may raise the necessary funds through preferred stock, mezzanine debt, and senior bank loans. One source stated that the proportion of preferred stock and debt will depend on additional investors signing up for each project, which may focus only on semiconductor or server fields. Another source mentioned that as a model for project financing, one possible breakdown could be common stock at 10%, preferred stock and mezzanine debt at 20%, and senior debt at 70%. Another scenario could be preferred stock and mezzanine debt at 40%, with senior debt at 50%. Both structures are considered highly leveraged, consistent with structures used in infrastructure projects such as pipelines, power plants, bridges, or telecommunications networks, but SoftBank can leverage Japan's low interest rates and popularity among retail bond investors to ease its burden. No decisions have been made yet, and discussions are ongoing. Sources say that SoftBank is reaching out to more partners, and anchor investors may ultimately choose other forms of financing based on market conditions. The feasibility of this financing structure is still a question: terms of project financing depend on a company's cash flow projections, and the future cash flow of artificial intelligence services remains unknown. A representative from SoftBank declined to comment. OpenAI CFO Sarah Friar recently stated in a blog post that the two companies will adopt a structured, phased investment approach. She wrote, "While OpenAI, SoftBank, Oracle Corporation, and MGX are the initial equity investors, the company plans to bring in more partners." She added, "We are actively seeking diverse institutional investors to build a strong, resilient capital base." Last week, Son and OpenAI CEO Sam Altman stood together in support of Stargate during a meeting with Japanese Prime Minister Kishi and Samsung Electronics Chairman Lee Jae-yong. As SoftBank engages in discussions, mega-enterprises are seeking new financing methods to cover the soaring costs of artificial intelligence hardware. Companies like CoreWeave, supported by NVIDIA Corporation, are using chips as collateral for loans, funded by firms like Blackstone Inc. and Magnetar, for multi-billion-dollar data center projects. This financial structure relies on the assumption that cutting-edge NVIDIA Corporation chips, currently valued at tens of thousands of dollars, will retain their value. Bloomberg analysts Marvin Lo, Sharon Chen, and Chris Muckensturm stated, "SoftBank's investment in OpenAI is primarily focused on the proprietary Large Language Models (LLM), with total investment expected to be between $15 billion and $25 billion. This may be risky in a market trending towards low-cost, open-source models." The increasing popularity of DeepSeek means that companies are beginning to pay attention to the customization, control, and cost effectiveness of this model.Benefits. Although Meta focuses on open source, AI giants Alphabet Inc. Class C (GOOGL.US) and Alibaba Group Holding Limited Sponsored ADR (BABA.US) have also joined the competition, launching cheaper open source versions in addition to their proprietary closed LLMs. This trend may make AI a technology that everyone can afford. This means that the investment return of OpenAI may be disappointing and may not prove that its current high valuation is justified.SoftBank's plan to provide funding for Stargate is the most concerning issue for investors and creditors, as they are worried about Masayoshi Son's tendency to engage in risky large deals. According to the average estimate of three analysts, SoftBank is expected to announce a net loss of about 155 billion yen (equivalent to $1 billion) in its third quarter report on Wednesday. Astris Advisory analyst Kirk Boodry estimates that after stocks like Coupang Inc. gave back some of the gains from the previous quarter, the Vision Fund's public investment portfolio lost about $700 million in the fourth quarter of last year. SoftBank's profits are also dependent on the performance of its portfolio of hundreds of unlisted startups. One of these companies is ByteDance, which is facing pressure to sell its popular video app TikTok in the United States or face the risk of being shut down. Another such privately held asset is eFishery, an Indonesian agricultural technology company that was valued at $1.2 billion less than two years ago, and is now facing liquidation and accounting fraud allegations.