SoftBank's $3bn turbine bet backfires on AI power play

SoftBank's big bet on AI power

In February, SoftBank's SB Energy subsidiary announced it would spend $33 billion on a nine point two gigawatt natural gas power plant to serve AI data centers.

Over-ordering to secure turbines

Starting about two years ago, SoftBank reportedly put down deposits on more than thirteen gigawatts of turbines, almost fifty percent more than it needed for its projects.

Why SoftBank over-ordered

Turbine order queues extended into the early nineteen thirties. SoftBank over-ordered to secure equipment immediately rather than wait years, betting it could corner the AI power market.

“SB Energy did not have a choice except to overbook turbines in the future if they wanted some turbines right away.”

The $7.1 billion quarterly loss

SoftBank announced a seven point one billion dollar quarterly loss on Tuesday, with over half stemming from losses on power-generating equipment it had ordered.

Over $3 billion in write-downs

SoftBank wrote down over three billion dollars in nonrefundable turbine deposits it now considered worthless, reflecting the collapse of its natural gas market strategy.

Data centers rethinking power strategy

As AI data centers operate longer, operators are finding natural gas carries risks including winter curtailments. Grid connections paired with large batteries may prove more cost-effective.

Natural gas market slowing

Data center operators appear to be shifting away from natural gas toward grid plus battery solutions, causing the natural gas market to develop more slowly than SoftBank expected.

SoftBank finds its ceiling

SoftBank's losses are unlikely to trigger mass cancellations of gas power plants, but the company may have found the natural gas market's limit for AI investment.

“For now, natural gas is riding high, though SoftBank may have found its ceiling.”