SoftBank might not be the first to invest in a hot trend, but when it does, it goes big.
Witness its $30 billion bet on OpenAI in early 2025 or its announcement in February that its SB Energy subsidiary would spend $33 billion on a 9.2-gigawatt natural gas power plant. If you can’t be first, be biggest, I guess.
That philosophy apparently spilled over into procurement, where orders were also supersized. Starting about two years ago, SoftBank reportedly put down deposits on more than 13 gigawatts of turbines, almost 50% more than it needed.
The decision to over-order undoubtedly helped secure turbines and speed up SoftBank’s projects.
“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 energy world was caught off guard by the swiftness and magnitude of AI’s rising power demands. Queues for turbine orders now extend into the early 2030s. As natural gas was shaping up to be a go-to power investment firm’s significant war chest, he could corner a portion of the market. If the AI world wanted power for its data centers, it would have to come to him
Now, that bet appears to have fizzled. SoftBank announced a $7.1 billion quarterly loss on Tuesday, with over half of that stemming from losses related to power-generating equipment. The investor had paid turbine manufacturers nonrefundable deposits to secure orders, and now it considered much of those worthless.
The move was also a costly bit of price discovery, Gardett said. Rather than overpay and potentially still be short of turbines, SoftBank overpaid and over-ordered.
“This charge is just that price discovery finally happening,” Gardett said.
The magnitude of that misplaced bet — over $3 billion — reflects some of the electricity mania that has overtaken the AI world. Faced with years-long waits to connect to the grid, many hyperscalers and developers have turned to natural gas as a sort of energy security blanket, something that is proven and familiar.
As AI data centers spend more time in operation, their operators are getting a better feel for what’s required to keep them operating. Natural gas might seem like a safe bet, but there are still risks, including winter curtailments when supplies dip and demand spikes, Brent Nelson, senior managing director of markets and strategy at Ascend Analytics, told the Equity podcast Wednesday.
In light of that, Nelson said the grid might still be their best bet. Most data centers would be best served by a grid connection, albeit a smaller one than they might normally request. To make up for the shortfall, large batteries are a cost-effective choice, Nelson said. They’d help shave peak loads or ride out requests from the utility to curtail electricity use.
Data center operators might be coming to that same conclusion, leading the natural gas market to develop more slowly than SoftBank expected.
SoftBank’s natural gas-related losses are unlikely to have a domino effect, leading to mass cancellations of gas power plants. AI’s power demand appears to be too large for that. For now, natural gas is riding high, though SoftBank may have found its ceiling.
Source: techcrunch.com
