According to The Information, SoftBank CEO Masayoshi Son is planning to borrow $16 billion to invest in AI, and may borrow another $8 billion next year. The following points are drawn from The Information’s reporting, and I give serious props to Juro Osawa and Cory Weinberg for their work.

SoftBank currently only has $31 billion in cash on its balance sheet as of December. Its net debt — which, despite what you think, doesn’t measure total debt but rather represents its cash minus any debt liabilities — stands at $29 billion… They plan to use the loan in question to finance part of their investment in OpenAI and their acquisition of chip design firm Ampere.

According to SoftBank’s reported assets, their holdings are worth about $219 billion (33.66 trillion yen), including stock in companies like Alibaba and ARM.

am I reading this correctly: softbank has $50 billion in debt, equal to about 25% of their total assets? is that… normal? these are genuine questions, not sure whether I’m misunderstanding something/whether this is actually usual

Why is Microsoft canceling a Gigawatt of data center capacity while telling everybody that it didn’t have enough data centers to handle demand for its AI products? I suppose there’s one way of looking at it: that Microsoft may currently have a capacity issue, but soon won’t, meaning that further expansion is unnecessary.

This is precisely it. Internally, Microsoft’s SREs perform multiple levels of capacity planning, so that a product might individually be growing and requiring more resources over the next few months, but a department might be overall shrinking and using less capacity over the next few years. A datacenter requires at least 4yrs of construction before its capacity is available (usually more like 5yrs) which is too long of a horizon for any individual product…unless, of course, your product is ChatGPT and it requires a datacenter’s worth of resources. Even if OpenAI were siloed from Microsoft or Azure, they would still know that OpenAI is among their neediest customers and include them in planning.

Source: Scuttlebutt from other SREs, mostly. An analogous situation happened with Google’s App Engine product: App Engine’s biggest users impacted App Engine’s internal capacity planning at the product level, which impacted datacenter planning because App Engine was mostly built from one big footprint in one little Oklahoma datacenter.

Conclusion: Microsoft’s going to drop OpenAI as a customer. Oracle’s going to pick up the responsibility. Microsoft knows that there’s no money to be made here, and is eager to see how expensive that lesson will be for Oracle; Oracle is fairly new to the business of running a public cloud and likely thinks they can offer a better platform than Azure, especially when fueled by delicious Arabian oil-fund money. Folks may want to close OpenAI accounts if they don’t want Oracle billing them someday.