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If you’re one of those executives at Alphabet, Meta Platforms or Amazon who deals with investors, here’s an idea: Put a large photo of SoftBank CEO Masayoshi Son on the wall of your office. Next time a visiting investor complains about your AI spending, point to the photo. That should end the discussion.
As much as big tech firms are spending on AI, at least they’re financing much, if not most, of it through internally generated cash. SoftBank in contrast has so far spent $54.6 billion on OpenAI shares by raising money through a combination of various kinds of loans and asset sales. And it’s now gone even further: On Thursday, SoftBank revealed that this week it had borrowed $10 billion using its OpenAI stake as collateral. As SoftBank has committed to put a further $10 billion into OpenAI in October, there’s a good chance it will make that payment using money borrowed against other OpenAI shares.
The risk of borrowing against its OpenAI stake is obvious. SoftBank’s disclosures say that under this new financing, finalized on Wednesday, it would have to cough up cash if the “fair value” of its OpenAI shares drops significantly. You can imagine a scenario whereby a slowdown in OpenAI’s business causes its valuation to drop, forcing SoftBank to sell some of its shares to meet the banks’ request for cash, thereby putting even more pressure on OpenAI’s valuation.
To be sure, that’s probably not going to happen. SoftBank could raise cash in other ways if it had to. Moreover, the chances of OpenAI shares falling enough to trigger a request for cash are likely small. After all, SoftBank estimates that as of June 30, its stake in OpenAI had gained $45 billion in value. That gives it plenty of headroom if anything were to go wrong. Even so, there are certainly precedents for tech stocks to drop as sharply as they once rose. Son has a seemingly limitless appetite for risk, but even he may be stretching things a bit.
California’s Time Machine
So this is what California and several other Democrat-led states want to preserve? Warner Bros. Discovery, the company they want to keep out of the clutches of Paramount Skydance, on Thursday reported an 11% drop in revenues and lower profits for the second quarter.
WBD’s report showed its streaming business is growing, but not enough to offset declines in its cable channel and film studio business. One of the big reasons for the revenue decline was that its cable channels lost the rights to broadcast NBA games, thanks to rising costs. In other words, WBD doesn’t have the scale to compete with bigger firms, including Netflix and Amazon Prime Video—something a combination with Paramount might fix.
The states, however, want to preserve the status quo. In their lawsuit, they argued that allowing two of Hollywood’s five film companies and two of five cable channel owners to combine would hurt movie theaters, the cable industry and audiences. It’s as though the state attorneys general who put together the lawsuit climbed into a time machine set to 1990, when Netflix, Amazon Prime Video and Apple TV Plus didn’t exist and cable was still the main way people watched TV.
The states won an injunction blocking the merger from closing pending a trial, which the court has set for March of next year. You can see where this is going. Freezing the deal for another six or nine months won’t help WBD’s competitive ability, given that its management has already spent much of the past year trying to sell the company rather than focusing on competing with its rivals. And if the deal is killed, both Paramount and WBD will be worse off. By trying to hold back the march of the time, the states may simply accelerate the decline of these Hollywood icons.
Today on The Information’s TITV
Check out today’s episode of TITV in which we discuss Nvidia’s radical idea to deal with the memory crunch and Google’s leadership shake-up.
In Other News
• Stripe recently entered exclusive talks to buy OpenRouter in a cash-and-stock deal that would value the startup for close to $10 billion, according to people with knowledge of the discussion.
• Chinese AI developer DeepSeek has resumed its second funding round, which it paused for more than a week following a leak of the transcript for a confidential call between CEO Liang Wenfeng and investors, according to a person with direct knowledge of the talks.
• Pinterest tapped David Brinker to serve as global head of content, the latest shake-up in a string of executive changes this year. His appointment follows last month’s news that Chief Content Officer Malik Ducard was leaving the company.
• Lyft reported 16% higher revenue for the second quarter, lifting net income 25%.
• Airbnb reported 17% higher revenue of $3.6 billion for the second quarter, while net income jumped 27%.
• OpenAI’s first hardware device, meant to make it easier for people to use AI, will cost more than $300 and will be shaped like a doughnut and about the size of a hockey puck, Bloomberg reported.
• Atlassian shares soared as much as 38% in after-hours trading on Thursday after the enterprise software company reported its first quarterly operating profit in more than two years. Atlassian CEO and co-founder Mike Cannon-Brookes said he planned to start buying as much as $250 million in shares, signaling his confidence in the stock, which has fallen 32% since the start of the year.
• Alphabet, the parent of Google, has raised as much as $25 billion in a new debt sale after attracting more than $115 billion of interest by offering a new-issue concession, with higher yields than some of its existing bonds, according to Bloomberg.
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