SoftBank announced a $100 billion commitment to US projects during Trump’s term.
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On Monday, SoftBank Group CEO Masayoshi Son and President-elect Donald Trump jointly announced a daring commitment: The Japanese technology giant will invest $100 billion in U.S. projects over the following 4 years. It was a glittering promise from a world technology leader who joined forces with the brand new president and pledged to create at the least 100,000 latest American jobs in artificial intelligence and other emerging technologies.
The announcement dwarfs the same announcement Son made in 2016 when Trump first took office – a pledge of $50 billion and 50,000 jobs. “President Trump is a double-down president,” Son said during a news conference at Mar-a-Lago, Trump’s private residence in Palm Beach, Florida. “I’m going to have to double down.”
There’s only one catch: SoftBank doesn’t currently have $100 billion. As of Monday’s close, its total market capitalization was $97 billion and the corporate has $29 billion in money. It’s unclear how the corporate would fund its commitment, and Son didn’t hassle to elaborate in his announcement.
The commitment lasts at some point of Trump’s presidency, meaning SoftBank can have years to make good on its promise. The company has fulfilled its $50 billion pledge in 2016, investing in dozens of firms including Slack and DoorDash. It’s harder to find out whether that created as many roles, and the corporate didn’t provide an estimate at the tip of Trump’s final term.
SoftBank didn’t reply to a request for comment.
The company’s most dear asset is a controlling stake in Arm Holdings, the British semiconductor company that went public last yr. Arm’s market capitalization is currently $152.6 billion, with SoftBank’s roughly 90 percent stake valued at $137.3 billion. In the event of liquidation, it might easily cover the corporate’s liabilities. Of course, it’s unlikely that SoftBank would sell its entire stake. Selling large amounts of shares would likely end in a collapse within the share price. It could use its Arm shares as leverage to boost debt that will finance this commitment; but SoftBank has already taken it out $8 billion in margin loans against his arm stock.
With access to the poor piggy bank, SoftBank doesn’t wish to repeat the missteps it made with Alibaba. In 2000, SoftBank invested $20 million within the Chinese e-commerce company, which went public in 2014 in the most important technology IPO ever, raising $25 billion. SoftBank allegedly owned 24% of the corporate on the time – a stake that shrank to 7% in 2022 and half a percent last May.
SoftBank’s announcement comes as several technology executives have sought to curry favor with Trump upon his return to power. Facebook parent Meta, Amazon and OpenAI have reportedly pledged in recent days to donate $1 million each to Trump’s inauguration fund. With key backers like Tesla CEO Elon Musk and enterprise capitalist Marc Andreessen, Silicon Valley has struck a unique tone than when Trump took office 4 years ago. Meta’s Mark Zuckerberg recently paid a visit to Mar-a-Lago, and Google CEO Sundar Pichai is reportedly planning a visit.
SoftBank is best known for its Vision Fund, a $100 billion enterprise fund announced in 2017 to speculate in technology firms worldwide, with half of the funds coming from sovereign wealth funds of Middle Eastern countries reminiscent of Saudi Arabia and the United Arab Emirates . But the Vision Fund became known for misguided bets, including on the ill-fated coworking real estate company WeWork, and Softbank posted an $18 billion loss. In 2020, activist investor Elliott Management bought a $2.5 billion stake within the Vision Fund and pushed for restructuring and greater transparency. When Softbank set out to boost more cash for a Vision Fund 2, the corporate had difficulty attracting investors on account of the issues of the primary fund.
As it attempts to succeed in the $100 billion mark, the corporate could potentially incorporate previously announced commitments into its balance sheet. For example, Softbank reportedly invested an extra $1.5 billion in OpenAI last month through an worker tender offer. In May, the Japanese company announced it might commit $9 billion annually to AI investments, but didn’t specify where it might place its bets.
Trump, who called Son “one of the most accomplished business leaders of our time,” seemed unconcerned about where the cash would come from and even pushed for more. “I looked at their books and they have the opportunity to do more,” Trump said Monday. “I’m going to ask them to do a little bit more.”
He then asked Son to double his pledge again to $200 billion. Son remained noncommittal but laughed and said he would “try to make it happen.” “He’s a great negotiator,” he said.
Additional reporting by Iain Martin.
