A few weeks ago, $SoftBank Group (9984.JP)$founder Masayoshi Son unveiled the Stargate Project with President Donald Trump, a collaboration with OpenAI on an AI project that may cost 500 billion dollars or more. Now Masayoshi Son is considering how to pay for this expense.

According to informed sources, this Japanese billionaire is researching a technique known as project financing, which is sometimes associated with Oil & Gas projects. This strategy is employed for constructing capital-intensive large infrastructure projects, such as the Alaska oil pipeline project. One major advantage is that it typically requires less upfront capital from anchor investors and can provide long-term financing based on the project's expected cash flow.

Informed sources say that SoftBank is exploring the incorporation of certain aspects of this financing structure into the Stargate Project’s funding, which will involve multiple datacenters and power generation projects. According to two sources familiar with the discussions, one proposed plan is for SoftBank, OpenAI, and its partners $Oracle (ORCL.US)$and Abu Dhabi’s MGX to contribute about 10% of the total cost, with the majority of the remaining funds raised through the bonds market.

Last month, SoftBank and OpenAI made a grand announcement that they would push forward the construction of dozens of gigawatts of Datacenter capacity, potentially becoming the largest deployment of computing power in history. In addition to breaking ground on the first Datacenter site in Abilene, Texas, Stargate is set to select more sites while eyeing additional projects in a dozen other states.

Masayoshi Son told Trump that the plan involves an immediate expenditure of 100 billion dollars. However, for most areas of Stargate, SoftBank has yet to determine the sources of the required funding and is discussing bringing more stakeholders on board.

The rise of Chinese startup DeepSeek, with its low-cost and open-source AI, intensifies competition and diminishes profit prospects for future technology providers, and these discussions are still in the early stages. OpenAI is also facing a takeover attempt led by Elon Musk, which adds further uncertainty to the financing plans for Stargate.

Theoretically, if SoftBank and OpenAI have equal ownership stakes in Stargate, $Oracle (ORCL.US)$ and MGX has a smaller ownership stake, then the two companies holding a combined 10% equity in Stargate would be valued at approximately 50 billion dollars, with SoftBank and OpenAI each investing 15 billion dollars to slightly below 25 billion dollars.

However, in practice, the Stargate will consist of a series of multi-billion dollar projects. Some informed sources say that most of the financing will be done on a project-by-project basis, apart from the equity pool. According to insiders, the financial structure of the project is very complex. Earlier media reports also mentioned that SoftBank plans to keep the total equity exposure of Stargate at around 10% and will adopt a project-by-project financing structure.

SoftBank, responsible for the financing of Stargate, may raise the required funds through preferred stocks, mezzanine debt, and senior bank loans. One informed person stated that the ratio of preferred stock to debt would depend on additional investors signing on each project, which might focus only on the Semiconductors or Server sectors.

Another person said that using project financing as a model, a possible breakdown scheme could be 10% common stock, 20% preferred stock and mezzanine debt, and 70% preferred debt. Another scenario could involve 40% preferred stock and mezzanine debt, and 50% preferred debt. Both structures fall within a high leverage framework, consistent with those used in infrastructure projects such as pipelines, power plants, bridges, or telecommunication networks, though SoftBank could leverage Japan’s ultra-low interest rates and popularity among retail bond investors, which may alleviate its burden.

No decisions have been made yet, and discussions are ongoing. Insiders say that SoftBank is engaging with more partners, anchoring investors who may ultimately choose other forms of financing based on market conditions. Whether this financing structure is feasible remains a question: the terms of project financing partly depend on the company's cash flow forecasts, while the future cash flow from AI services remains unknown.

A representative from SoftBank declined to comment. OpenAI's Chief Financial Officer Sarah Friar stated in a recent blog post that the two companies will take a "structured, phased investment approach." In her post, she mentioned that while OpenAI, SoftBank, Oracle, and MGX are among the first equity investors, the company plans to bring in more partners. She said, "We are actively attracting a diverse range of institutional investors to build a strong and resilient capital base."

Last week, during a meeting with Japanese Prime Minister Shigeru Ishiba and Samsung Electronics Chairman Lee Jae-Yong, Masayoshi Son stood alongside OpenAI CEO Sam Altman, seeking support for Interstellar Gate.

As discussions unfold at SoftBank, hyperscale companies are seeking new financing methods to cover the soaring costs of AI hardware, including$NVIDIA (NVDA.US)$Companies, including supported startup CoreWeave, are using chips as collateral to finance billions of dollars worth of datacenter projects with backing from firms like Blackstone and Magnetar. This financial structure relies on the assumption that cutting-edge NVIDIA chips—currently worth tens of thousands of dollars—will maintain their value.

Bloomberg Analysts Marvin Lo, Sharon Chen, and Chris Muckensturm stated, "SoftBank's investment in OpenAI is primarily focused on proprietary large language models (LLMs), with total investments potentially ranging between 15 billion and 25 billion dollars. This could be risky as the market shifts towards low-cost, open-source models. The increasing popularity of DeepSeek means that companies are beginning to value customization, control, and cost-effectiveness of such models."

Although $Meta Platforms (META.US)$ Focusing on open source, but AI giants. $Alphabet-A (GOOGL.US)$ and$Alibaba (BABA.US)$They 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 OpenAI's return on investment may be disappointing, failing to justify its current high valuation.

How SoftBank plans to fund the Stargate is the most concerning issue for investors and creditors, who worry that Masayoshi Son has a tendency for risky, large-scale deals. According to the average estimate from three Analysts, SoftBank is expected to announce a net loss of approximately 155 billion yen (about 1 billion USD) for the third fiscal quarter report on Wednesday. Astris Advisory Analyst Kirk Boodry estimates that in$Coupang (CPNG.US)$ After the stocks gave back some of the gains from the previous quarter, the Vision Fund's public investment portfolio lost approximately 0.7 billion USD in the fourth quarter of last year.

SoftBank's profits also depend on the performance of hundreds of unlisted startups on its books. One of these is ByteDance, which is under pressure to sell its popular video application TikTok in the USA, or face the risk of being shut down. Another such privately held asset is the Indonesian agricultural technology company eFishery, which was valued at $1.2 billion less than two years ago and is now facing the possibility of liquidation and accounting fraud charges.

Editor/danial