SoftBank has halted negotiations to acquire Switch — an American data center operator — in a deal that was once valued at around $50 billion, according to sources cited by Bloomberg. The slowdown is primarily explained by internal doubts about how to fund such a large purchase and the complexity of managing a wide network of facilities.
The decision comes at a time when the “digital brick” business is experiencing a new cycle of euphoria: the expansion of artificial intelligence is skyrocketing the demand for electrical power, land, cooling, and especially computing capacity hosted in data centers. In this landscape, Masayoshi Son is aiming to position SoftBank as a significant player in the infrastructure that will enable the next wave of services based on generative models.
Switch: the jewel that got too expensive… and now looks to the stock market
Switch is known for its large data center campuses in the U.S. and for a growth strategy supported by locations with high energy availability. Among its assets, its “Core Campus” in Las Vegas stands out, with full construction associated with plans for up to 495 MW of power.
The problem for SoftBank is that Switch is no longer a “cheap opportunity.” The company was delisted from the stock exchange in 2022 after being acquired by DigitalBridge and IFM in a deal worth about $11 billion. According to the same industry sources, an IPO is now even being considered, which could value the company near $60 billion.
Strategic shift: buying DigitalBridge to get closer to control
Although SoftBank has paused its direct purchase of Switch, the Japanese group has made a move on another front: an agreement to acquire DigitalBridge, the majority shareholder of Switch. The transaction has been announced as a buyout for approximately $3 billion in cash, with an enterprise value around $4 billion.
In other words: SoftBank is attempting to “enter through the manager’s door” rather than paying the maximum price for its flagship asset. It’s a way to gain influence over a digital infrastructure portfolio without immediately taking on the challenge of integrating and operating Switch as a monumental acquisition.
And what does Stargate have to do with all this?
The pause in negotiations has also been seen as a setback for Son’s ambitions in AI infrastructure linked to Stargate, the large project announced to scale up computing capacity in the U.S. with partners like OpenAI and Oracle, backed by an investment plan worth hundreds of billions of dollars.
In this context, Switch would have served as a “shortcut” to add established campuses with expansion plans. However, the size of the deal and the operational demands of data centers (energy, supply chains, permits, liquid cooling, high-capacity networks) turn any mega-acquisition into an exercise nearly as complex as building from scratch.
Deeper analysis: the money’s there… but so is the risk
The clear conclusion from history is that the appetite for data centers is still growing, but not everything is worth it. When valuations approach figures close to “systemic risk” for a single company, even giants like SoftBank think twice. Especially in a sector where a planning mistake — such as an electrical bottleneck or overly optimistic expansion schedule — can turn a “premium” asset into a multimillion-dollar headache.
Frequently Asked Questions
What is Switch and why is it so interesting?
It is a data center operator with large campuses in the United States. In the race for AI, having ready electrical capacity and space for infrastructure has become a critical asset.
Why has SoftBank paused the deal?
According to sources cited by Bloomberg, due to financial and logistical hurdles: both the cost of the acquisition and the difficulty of managing an extensive network of data centers.
What role does DigitalBridge play in all this?
DigitalBridge is the majority shareholder of Switch. SoftBank has announced its acquisition of DigitalBridge, serving as an indirect way to gain exposure to the business without (for now) executing a direct purchase of Switch.
What does Stargate have to do with the data center market?
Stargate is a plan to deploy massive AI infrastructure. Projects like this increase demand for campuses, electrical power, and interconnection capacity, tightening the market and pushing valuations higher.
via: datacenterdynamics