SoftBank Group recorded a 1.12 trillion yen ($7 billion) quarterly net loss on Tuesday, driven largely by over-ordering power-generation equipment for its U.S. artificial intelligence data centers.
The firm, which had sought to corner the market on turbines to fuel the AI boom, now considers much of those nonrefundable deposits worthless.
The losses highlight the volatility of the rush to secure energy for AI infrastructure. While SoftBank aimed to guarantee supply in a market where queues for turbines extend into the early 2030s, the strategy resulted in a 597.2 billion yen ($3.7 billion) loss in the six months ending Sept. 30 related specifically to procurement shifts, according to CNBC.
“SB Energy did not have a choice except to overbook turbines in the future if they wanted some turbines right away,” Peter Gardett, CEO of Noreva, told TechCrunch. The company had placed deposits on more than 13 gigawatts of turbines starting about two years ago, a volume nearly 50% higher than its immediate requirements, according to TechCrunch.
This aggressive procurement strategy served as a costly form of "price discovery," according to Gardett. Rather than facing potential project delays, SoftBank chose to overpay and over-order, a bet that has now partially fizzled as data center operators reassess their power needs, TechCrunch reported.
Financial Impact of Procurement Losses
SoftBank’s fiscal second-quarter net loss reached 1.12 trillion yen, a sharp reversal from the 2.5 trillion yen profit reported during the same period a year prior, according to CNBC. Beyond the 597.2 billion yen ($3.7 billion) charge for power equipment, declines in the value of Intel shares also contributed to the negative result.
Despite these losses, SoftBank executives defended the strategy during an earnings call, describing the payments as "bridge investments" made to secure equipment amid widespread shortages. The company’s cumulative investment in power-generation gear for U.S. projects, including the PORTS-Pike Technology Campus in Ohio, totaled $9.48 billion as of the end of September, CNBC reported.
Strategic Reassessment of AI Infrastructure
While natural gas was initially viewed as a reliable "blanket" for AI power demands, it carries risks such as winter supply curtailments, Brent Nelson, senior managing director of markets and strategy at Ascend Analytics, told the Equity podcast.
Data center operators are increasingly exploring grid connections paired with large-scale battery storage as a more cost-effective alternative to dedicated gas plants, Nelson noted. This evolving demand pattern may explain why the natural gas market for data centers has developed more slowly than SoftBank’s initial projections anticipated.
Frequently Asked Questions
How much did SoftBank invest in OpenAI?
As of the end of September, SoftBank’s cumulative investment in OpenAI reached $54.6 billion, with a fair value of $99.6 billion, according to CNBC.
What is the status of SoftBank’s data center projects?
The company maintains a 20-year lease agreement with OpenAI for eight gigawatts of IT capacity at a data center project in Ohio and is currently developing AI infrastructure in Malaysia in partnership with Grab and PETROS, as reported by CNBC.
Analysts do not expect a domino effect, as AI power demand remains high. While SoftBank may have found a ceiling in its natural gas procurement strategy, the industry continues to prioritize large-scale energy access to meet the computing requirements of AI development.
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