SoftBank Group, led by Chairman Masayoshi Son, has reportedly halted negotiations to acquire U.S. data center company Switch.
According to Bloomberg on Sunday, SoftBank recently withdrew its plan to acquire Switch and suspended negotiations. Son had originally sought direct control of Switch's energy-efficient data center network to provide stable computing power to partners including OpenAI. The company had pursued an acquisition worth approximately $50 billion for several months, but abandoned the full acquisition plan earlier this month and scrapped the announcement originally scheduled for January. If completed, the deal would have been the largest in SoftBank's history.
Sources indicate both parties are now discussing a partial equity investment or partnership instead of a full acquisition. SoftBank secured influence earlier this month by signing a $3 billion deal to acquire DigitalBridge, a New York-listed investment firm that holds a majority stake in Switch.
The suspension appears to stem from a combination of the massive acquisition cost burden and practical challenges of operating data centers. SoftBank reportedly had internal concerns about directly operating the vast network of data center campuses spanning from Las Vegas to Atlanta. Switch's plans to pursue an initial public offering this year also became a complicating factor. Switch's investors expect a valuation of approximately $60 billion including debt through the listing, making it difficult to align expectations. The potential for review by the Committee on Foreign Investment in the United States (CFIUS), which applies strict standards to foreign acquisitions of critical U.S. infrastructure, also likely added to the burden.
The suspension is expected to create setbacks for Son's Stargate project. Stargate is Son's ambitious plan to build large-scale data centers in the United States to gain an edge in the AI supremacy race. He has promised to immediately invest $100 billion in the project, which has a total scale of $500 billion, and the Switch acquisition was intended to form its core foundation.
While a resumption of full acquisition efforts appears unlikely, Son's strong determination suggests future collaboration arrangements remain possible. Before acquiring British chip designer Arm in 2016, Son had shown interest for several years.
Despite withdrawing the Switch acquisition plan, SoftBank continues its aggressive AI push. The company has significantly increased AI investments in recent months. Last month, it invested $22.5 billion in OpenAI to secure an 11% stake and successively acquired U.S. chip designer Ampere Computing ($6.5 billion) and ABB's robotics division ($5.4 billion). To finance these moves, SoftBank sold its T-Mobile stake, disposed of its entire Nvidia holdings, and expanded loans using Arm shares as collateral.
Concerns about financial health are emerging as aggressive investments continue. S&P Global warned earlier this month that "SoftBank's AI investment expansion and Arm's sharp share price decline late last year are putting pressure on its creditworthiness," adding that "without prompt measures such as asset sales, downgrade pressure will intensify."
