SoftBank's Billion-Dollar Loss May Have Capped AI's Natural Gas Ambitions
SoftBank may not be the first to invest in a hot trend, but when it does, it goes big. Consider its $30 billion bet on OpenAI in early 2025, or its February 2026 announcement that subsidiary SB Energy would spend $33 billion on a 9.2-gigawatt natural gas power plant. If you can't be first, be biggest, I suppose.
That philosophy apparently spilled over into procurement, where orders were also supersized. Starting about two years ago, SoftBank reportedly placed deposits on more than 13 gigawatts of turbines—nearly 50% more than it needed.
Over-Ordering to Secure Supply
The decision to over-order undoubtedly helped secure turbines and accelerate 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 via email.
The energy world was caught off guard by the speed and scale of AI's rising power demands. Turbine order queues now stretch into the early 2030s. As natural gas shaped up to be a go-to power source for the AI boom, CEO Masayoshi Son bet that deploying his investment firm's substantial war chest could let him corner a portion of the market. If the AI world wanted power for its data centers, it would have to come to him.
The Bet Fizzles
Now that bet appears to have fizzled. SoftBank announced a $7.1 billion quarterly loss on Tuesday, with more than half stemming from losses related to power-generating equipment. The investor had paid turbine manufacturers nonrefundable deposits to secure orders, and it now considers much of those worthless.
The move was also a costly bit of price discovery, Gardett said. Rather than overpay and potentially still come up short on turbines, SoftBank overpaid and over-ordered.
"This charge is just that price discovery finally happening," Gardett said.
The magnitude of the 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 kind of energy security blanket: proven, familiar, and available.
Natural Gas Isn't Risk-Free
As AI data centers spend more time in operation, their operators are getting a better feel for what's required to keep them running. Natural gas might seem like a safe bet, but risks remain, 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 on 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 would help shave peak loads or ride out requests from the utility to curtail electricity use.
Data center operators might be reaching that same conclusion, leading the natural gas market to develop more slowly than the industry's most aggressive bets anticipated.
via TechCrunch AI