SoftBank’s $3.7 Billion Power Gear Loss Tests AI’s Natural Gas Bet
SoftBank took a $3.7 billion hit on power equipment for US AI data centers, raising questions about how far the industry's natural gas push can go.
SoftBank Group, the Japanese technology investor that has bet heavily on artificial intelligence, has taken a roughly $3.7 billion charge on power-generation equipment it ordered for US AI data centers, a loss that pushed the company to a $7 billion quarterly deficit and is prompting questions about how far the AI industry’s rush toward natural gas power can go.
What happened
SoftBank reported on Tuesday, Nov. 10, a net loss of about 1.1 trillion yen, or $7 billion, for the July-to-September quarter, Reuters reported. The result was far worse than analysts had expected and compared with a profit of 2.5 trillion yen a year earlier, when the company booked a large gain on its stake in OpenAI, the maker of ChatGPT.
The single biggest drag was the cost of changing plans for power equipment. According to Reuters, SoftBank recorded a $3.7 billion loss on advance payments for equipment intended for US data center projects, including a large development in Pike County, Ohio. Open Magazine, citing SoftBank’s filing, put the figure at $3.73 billion, made up of $2.85 billion in non-refundable advances paid to reserve factory capacity and equipment and $880 million from changing or settling contracts. TechCrunch described the misplaced bet as worth more than $3 billion and said it accounted for over half of the quarterly loss.
The equipment was secured through a SoftBank subsidiary called Silver Bands 7, according to Open Magazine, which reported that cumulative payments under these arrangements had reached $9.48 billion by Sept. 30. SoftBank did not break the charge down by project site.
Yoshimitsu Goto, SoftBank’s chief financial officer, said fierce competition for energy supply and generating equipment had led the company to buy before long-term specifications were settled, Reuters reported. “There are many cases where you have to change strategy,” he said. Kazuko Kimiwada, the company’s chief accounting officer, said the payments could not be refunded when orders were canceled and also carried fees.
SoftBank said it could be entitled to rebates of up to $2.1 billion on future equipment purchases. Open Magazine reported that those rebates would be spread over 10 years and depend on buying qualifying equipment, and that SoftBank did not record them as an asset because it could not yet determine the amount.
Why it matters
The charge offers a rare look at the costs behind the scramble to power AI. Facing multi-year waits to connect to the electric grid, many large cloud operators and developers have turned to natural gas plants they can build next to their data centers. Order queues for gas turbines now stretch into the early 2030s, TechCrunch reported, because the energy sector was caught off guard by how quickly AI electricity demand surged.
About two years ago, SoftBank reportedly put down deposits on more than 13 gigawatts of turbines, almost 50% more than it needed, according to a Wall Street Journal report cited by TechCrunch. The publication said SoftBank’s chief executive, Masayoshi Son, reportedly bet that the company could use its deep pockets to corner part of the turbine market so AI firms would have to come to SoftBank for power.
Peter Gardett, chief executive of Noreva, told TechCrunch that SoftBank’s energy arm “did not have a choice” but to overbook turbines if it wanted some delivered right away, and called the charge a form of price discovery finally taking place.
The disclosure rippled through the equipment market. Shares of GE Vernova, a major US maker of gas turbines, fell nearly 7% after SoftBank revealed the loss, according to market reports. GE Vernova said at the end of September that it had 64 gigawatts of gas-power equipment in its order backlog and another 58 gigawatts covered by slot reservations, Open Magazine reported.
Background
SoftBank has become one of the most aggressive investors in AI. Reuters reported that it has spent $64.6 billion for a 13% stake in OpenAI. In February, its energy unit SB Energy announced a $33 billion, 9.2-gigawatt natural gas power plant, according to TechCrunch. Pike County officials said in October that the Ohio campus would be developed in phases by SB Energy, with OpenAI as the main tenant, and that capacity was expected to come online starting in 2028, Open Magazine reported.
The heavy spending has also lifted borrowing costs. Reuters said SoftBank’s financing costs more than doubled to 462 billion yen in the quarter, while it raised a record $56.5 billion, including bonds and a larger margin loan on its stake in chip designer Arm.
What comes next
Analysts quoted by TechCrunch do not expect the loss to trigger widespread cancellations of gas plants, given the scale of AI power demand. But the economics may be shifting. Brent Nelson, senior managing director of markets and strategy at energy analytics firm Ascend Analytics, told TechCrunch’s Equity podcast that many data centers could be better served by a smaller grid connection paired with large batteries that can cover peak demand or respond when utilities ask users to cut back.
Goto suggested more scrutiny may follow inside SoftBank, telling reporters that “how to assess assets we no longer need may become a subject of discussion,” according to Reuters. For now, natural gas remains a popular option for AI developers, but SoftBank’s write-down shows that betting big on scarce equipment carries real risks.
