$50 billion data center deal stalls; SoftBank suspends acquisition of Switch

$50 billion data center deal stalls; SoftBank suspends acquisition of Switch

SoftBank Group founder Masayoshi Son’s ambitious "Stargate" AI infrastructure plan has suffered a major setback, as SoftBank has halted comprehensive acquisition talks for U.S. data center operator Switch Inc. In previous months, Son had been seeking to close this roughly $50 billion deal, aiming to directly control Switch’s high-efficiency data center network to provide computing power for partner OpenAI.

According to sources cited by Bloomberg, Son acknowledged earlier this month that a full acquisition was no longer feasible and canceled the announcement originally scheduled for January. Previously, some within SoftBank had expressed concerns over the sheer size of the deal and the logistical challenges of data center operations spanning locations from Las Vegas to Atlanta. Meanwhile, Switch is preparing for an IPO as early as this year, with backers considering achieving a valuation—including debt—of around $60 billion through going public. Any potential deal could also face strict scrutiny from the Committee on Foreign Investment in the United States (CFIUS).

Despite the suspension of acquisition talks, both parties have not completely cut contact. Sources told Bloomberg that SoftBank and Switch are still actively discussing possible partial investments or forming a partnership. As part of this strategy, SoftBank signed a $3 billion deal earlier this month to acquire NYSE-listed investment firm DigitalBridge Group, which holds a majority stake in Switch.

This change has a direct impact on SoftBank’s global positioning in the AI arms race. Previously, Son had pledged to "immediately" deploy $100 billion along with OpenAI, Oracle, and Abu Dhabi’s MGX to advance the $500 billion "Stargate" project. Failing to fully acquire Switch's data center assets means SoftBank will need to adjust its path for establishing core AI infrastructure in the U.S., while also highlighting the valuation and regulatory resistance faced when expanding in hardware infrastructure.

Acquisition Blocked and Strategic Shift

This breakdown in negotiations involves more than the transaction amount, but also SoftBank’s strategic execution in the AI infrastructure sector. Son has always viewed the "Stargate" project as key for SoftBank to play a bigger role in the AI race. Although a comprehensive acquisition seems unlikely for now, given Son’s keen interest in the deal, both sides may still seek other ways to cooperate in the future.

Historically, Son has shown long-term strategic patience—for example, before successfully acquiring UK chip designer Arm Holdings Plc in 2016, he had tracked the company for years. SoftBank currently owns a manufacturing plant in Ohio, operated by Taiwan’s Hon Hai Precision Industry—this may serve as a reference model for future cooperation between SoftBank and Switch.

Missed Hardware Windfall and Aggressive Bets

Despite being an early AI technology investor, SoftBank has largely been absent in the global boom to build the semiconductors, server racks, and other hardware needed to support machine learning. For now, most of the capital in this sector is flowing to a small circle of chipmakers including Nvidia and TSMC.

To fill this gap, SoftBank has doubled down on bets in AI in recent months. Over the past year, the Tokyo-based company has built up an 11% stake in OpenAI and invested $22.5 billion just last month. In addition, SoftBank acquired U.S. chip designer Ampere Computing LLC for $6.5 billion and announced a $5.4 billion purchase of ABB's robotics division. To raise funds, SoftBank sold its stake in T-Mobile US, liquidated all of its Nvidia shares, and increased margin loans backed by its Arm shares.

SoftBank’s aggressive investments in AI, combined with the sharp drop in Arm’s share price at the end of last year, are putting pressure on its credit grading. Earlier this month, S&P Global Ratings issued a warning: Although SoftBank has maintained financial discipline, analysts Kei Ishikawa and Makiko Yoshimura noted in a report that "if SoftBank doesn’t take swift relief measures, such as liquidating held assets, the pressure on its credit rating will intensify."

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