SoftBank reported a $7.1 billion quarterly loss on Tuesday, with more than half of that figure stemming from losses related to power-generating equipment. The company had previously placed nonrefundable deposits on more than 13 gigawatts of turbines, an amount nearly 50% greater than its actual requirements. These over-orders were intended to secure supply and accelerate projects for its SB Energy subsidiary, which had announced plans to spend $33 billion on a 9.2-gigawatt natural gas power plant.
The decision to over-order was a response to extreme demand in the energy sector, where turbine order queues now extend into the early 2030s. Masayoshi Son had positioned the firm to corner a portion of the natural gas market to meet the rising power demands of AI data centers. However, the company now considers much of the capital used for those turbine deposits to be worthless.
Peter Gardett, CEO of Noreva, said the company's decision to overbook was a necessity to secure immediate equipment. Regarding the recent financial hit, Gardett said, “This charge is just that price discovery finally happening.”
Market analysts suggest the strategy may have miscalculated the speed of the natural gas market's development. Brent Nelson, senior managing director of markets and strategy at Ascend Analytics, noted that while natural gas is a familiar energy source, it carries risks such as winter curtailments when supply dips and demand spikes. Nelson suggested that data center operators might find grid connections supplemented by large batteries to be a more cost-effective way to manage peak loads.
While the $3 billion misplaced bet reflects the scale of electricity demand driven by the AI boom, the losses are unlikely to trigger mass cancellations of gas power plants. The scale of AI's power requirements remains high, though SoftBank may have reached the ceiling of its specific investment strategy.
