SoftBank may not be the first to invest in hot trends, but when it does, it grows big.
Witness the $30 billion bet on OpenAI in early 2025 or the announcement in February that a subsidiary of SB Energy would spend $33 billion on a 9.2 gigawatt natural gas power plant. I think if you can’t be the first, be the biggest.
That philosophy clearly spilled over into sourcing, and the orders were huge. For about two years, SoftBank has reportedly put up deposits for more than 13 gigawatts of turbines, almost 50% more than needed.
The decision to overorder undoubtedly helped secure turbines and speed up SoftBank’s project.
“SB Energy had no choice but to overbook turbines in the future if they needed them now,” Noreva CEO Peter Gardett told TechCrunch in an email.
The energy industry was caught off guard by the rapidity and scale of AI’s power demand. The waiting list for turbines now stretches into the early 2030s. As natural gas becomes the go-to power source for the AI boom, CEO Masayoshi Son has bet that he can corner a slice of the market by leveraging the investment firm’s significant muscle. If the world of AI needs data center power, it has to come to him.
Now, that bet appears to have failed. SoftBank on Tuesday announced a quarterly loss of $7.1 billion, more than half of which was due to losses related to power generation equipment. The investors paid non-refundable deposits to turbine manufacturers to secure their orders, many of which they now consider worthless.
Gardette said the move was also a costly price discovery. Instead of overpaying and potentially still running out of turbines, SoftBank overpaid and overordered.
“This indictment is just that price discovery finally happening,” Gardette said.
The size of that misplaced bet, over $3 billion, reflects some of the power mania that has taken the AI world by storm. Faced with years of connectivity to the grid, many hyperscalers and developers are turning to natural gas as a tried-and-true, familiar energy security blanket of sorts.
As AI data centers spend more time in operation, operators are gaining a better understanding of what is needed to maintain operations. While natural gas may seem like a safe option, there are still risks, such as curtailments during the winter months when supply is low and demand soars, Brent Nelson, senior managing director of markets and strategy at Ascend Analytics, said on Wednesday’s Equity Podcast.
With that in mind, Nelson said the grid may still be the best bet. Most data centers are best served by grid connectivity, even if they are smaller than typically required. Nelson said larger batteries are a cost-effective option to fill the gap. These could help reduce peak loads or override requests from power companies to reduce power usage.
Data center operators could come to a similar conclusion, and as a result, the natural gas market could develop more slowly than SoftBank expected.
It is unlikely that SoftBank’s natural gas-related losses will have a domino effect and lead to mass cancellations of gas power plants. The power demands of AI seem too great for that. For now, natural gas prices remain high, but SoftBank may have found a ceiling.
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