https://warwickpowell.substack.com/p/the-ouroboros-out-of-the-cage
SoftBank, Wall Street and the Perilous Alchemy of Collateralising Private AI Capital
Dr Warwick Powell
Sep 04, 2026

Preface: I’ve been mapping the structural decay of western techno-capitalism for a while. This essay contributes to this broad theme of work. Late stage financialisation relies on the proliferation of fictitious capital — claims that expand exponentially while severing ties to real productive capacity (the world of use values) and thermodynamic realities. This essay situates the recent SoftBank-OpenAI leverage loop within this wider context. Far from being anomalous, the leverage loop represents a circular debt engine illustrative of the terminal phase of American financial dominance. It harks to a desperate attempt to monetise unpriced, speculative assets to offset declining industrial returns. Here, the AI boom reveals itself not as a renaissance of American industry but as financialisation’s last, hyper-leveraged hurrah. While the arrangers make off with fees, retail investors will ultimately be left carrying the can. It’s another symptom suggestive that we have entered a terminal phase.

The Ouroboros is an ancient mythical motif; it is the serpent that devours its own tail. It symbolises eternal cycles, infinite loops and self-sustained persistence. But when applied to corporate balance sheets, the Ouroboros is no longer a poetic symbol of eternity but becomes symbolic of something far more destabilising: financialisation feeding on its own paper gains to manufacture synthetic liquidity out of thin air.

SoftBank’s latest financial manoeuvre is the most recent instance of this act of self-devouring. The Japanese technology conglomerate just completed a $10 billion loan facility secured against its equity stake in OpenAI. The explicit purpose of this massive debt draw? To acquire more shares in OpenAI. In essence, SoftBank is pledging its existing OpenAI shares — an illiquid asset — as collateral to double down on that exact same illiquid asset. It is a leverage loop of staggering proportions, a financial engine engineered to convert unmonetised private valuations into new, deployable money capital.
The Anatomy of the Play

This transaction represents a watershed moment in the financialisation of technology. Consider first the price tag attached to the money. The banking syndicate providing the debt facility — led by titans Goldman Sachs and JPMorgan Chase alongside private capital giants like Apollo — arranged the loan at an interest rate of 7.88%.

In the world of corporate finance, 7.88% is a screaming signal. A standard margin loan against liquid, publicly traded equities like Microsoft, Apple or Alphabet typically carries an interest rate barely above benchmark central bank rates (often 2.5% to 3.5%). Why? Because if the stock price drops, the lending bank can press a button and liquidate millions of shares on an open exchange in seconds. This ability enables the lender to insulate itself from default.

At nearly 8%, the Wall Street syndicate is openly signalling that OpenAI’s stock is not standard collateral. OpenAI is a private entity. Its shares do not trade on any public exchange. There is no continuous price discovery, no order book and zero instant liquidity. If SoftBank defaults, Goldman Sachs cannot hop onto an E*TRADE workstation and unload $10 billion worth of private AI startup shares.

The valuation exists purely in private funding rounds, mark-to-model accounting and investor decks.

Furthermore, the banks are fully aware of this reality. Recognising that private AI valuations are unpriced, volatile and impossible to independently audit on a mark-to-market basis, the lenders refused to execute a traditional non-recourse asset loan. They demanded — and received — full corporate guarantees from SoftBank Group Corp.

This detail strips away the illusion that the loan is neatly isolated within a special purpose vehicle (SPV) tied solely to the OpenAI holding. By appending corporate guarantees, SoftBank has tied this speculative AI position directly to its broader corporate balance sheet. If the AI valuation apparatus stumbles, the risk does not remain neatly partitioned inside the OpenAI investment; it bleeds straight into SoftBank’s existing $135 billion total debt stack. This is a recipe for contagion.

Using an illiquid, unpriced asset as leverage to buy more of the exact same asset is not wealth creation; it is paper alchemy. It creates a closed circuit where debt supports the valuation that justified the debt in the first place.

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The Ouroboros Mechanism and the Great Escape

Let’s break down the circular logic of this structure. It represents the ultimate realisation of mark-to-model financial engineering. First, SoftBank marks up its existing OpenAI stake based on private funding rounds. It then pledges those unlisted shares to the Wall Street syndicate for a $10 billion cash loan at 7.88%. Next, it injects that $10 billion directly back into OpenAI to buy more stock, supporting and elevating the private valuation. Finally, the higher valuation expands its borrowing base, allowing the loop to start anew.

In a healthy market, debt is backed by cash flows, real physical assets or highly liquid instruments. Here, paper gains generate debt, which is then used to buy more equity, which in turn defends and elevates the paper valuation. It is a financial perpetual motion machine. Minsky described this as the Ponzi phase in his financial instability hypothesis. As long as private AI valuations climb, Masayoshi Son looks like a visionary who unlocked billions in hidden liquidity. But perpetual motion machines exist only in physics textbooks as warnings, not functioning economic systems.

Now, one would wonder, why would investment banks participate in an 8% loan tied to an unlisted tech firm with $135 billion in parent-level debt hovering over it? The short answer is: because investment banks rarely intend to hold the risk they originate.

Under modern Basel capital requirements, holding $10 billion in illiquid, high-yield debt on a balance sheet forces banks to set aside vast reserves of regulatory capital. The goal of the Goldman-JPMorgan-Apollo syndicate was never to sit back and collect 7.88% until maturity. The goal is securitisation and distribution: packaging the risk and pushing it down the institutional and retail food chain.

We are potentially about to witness the next logical phase of this financialisation play through three primary conduits. Firstly, we will see the production of structured retail notes and yield products. Wall Street’s financial engineers will likely slice this credit risk into structured notes marketed to private wealth clients and retail investors. Pithy marketing brochures will tout: “7.5% Annual Income Secured by a Premier Global Tech Giant.” The fine print, of course, conceals the reality that the investor is absorbing the tail-risk of a private AI equity bubble compression.

Then, these products will be pushed out via private credit and BDV feeder funds. Over the last five years, retail capital has poured into Business Development Companies (BDCs) and non-traded private credit funds hunting for yield. Syndicate leaders like Apollo excel at distributing senior and mezzanine slices of such loans into yield-focused retail and institutional private credit vehicles. It’s all about the magic of other people’s money.

Last but not least, we could see trenching and synthetic securitisation. By breaking the $10 billion exposure into AAA-rated senior tranches and higher-yielding mezzanine layers, the banks can sell the safer portions to conservative pension-adjacent funds while offloading the riskier debt onto yield-starved wealth management accounts.

The banks pocket massive origination, structuring and syndication fees upfront. They shed the duration and default risk, transferring it into the broader ecosystem — principally to “mum and dad” investors, either directly or indirectly. If OpenAI successfully converts its massive compute expenditure into market-dominating cash flows and hits a trillion-dollar IPO, every participant in the chain wins. But if compute costs, corporate friction or open-source competition erode margins, the originating desks will have long since moved on. The losses will land quietly in retail brokerage accounts and private credit income funds.

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Financialisation Unbound

What makes this play so symbolic of our current economic moment, perhaps as I mused elsewhere a terminal phase, is how detached it is from physical production or organic revenue. The dynamics of this process have been explored in my book Thermoeconomics in a Time of Monsters, and can also be found in a previous essay, the “Endogenous Crisis Machine,” that summarises the key issues in chapter 8 of the book which considers among other the rationality of hyper-financialisation. OpenAI requires hundreds of billions of dollars in physical infrastructure — data centres, submarine cables, nuclear power agreements, electricity distribution and transmission networks expansions, as well as advanced semiconductor fabs. Yet the capital flowing into it is increasingly generated through high-order financial engineering.

SoftBank’s $10 billion loop demonstrates that financialisation has broken out of its cage; it has become hyper-financialised. It isn’t content to simply trade public securities or lever up steady cash flows. It is now monetising hyper-speculative, unpriced private technological expectations to fund the very expansion needed to justify those expectations. In Minsky’s financial instability hypothesis, this modality was characterised as the Ponzi phase of credit expansion.

When financial constructs feed on themselves, they create an illusion of stability and growth that persists right up until the moment it breaks. The Ouroboros may look majestic while it spins in a closed circle, but eventually, it runs out of tail to eat.