SoftBank took a $3.7 billion loss on power equipment it reserved early for its AI data centers

SoftBank Group has booked a $3.7 billion loss on power-generation equipment it paid to reserve for U.S. AI data centers, then changed its plans for. The charge, disclosed with quarterly results on November 10, helped push the Japanese investor to a net loss of about $7 billion for July through September.

It puts a public price tag on a common practice in the AI buildout: paying up front for scarce turbines and electrical gear before a project's design is final. Much of what SoftBank paid was non-refundable, and its balance sheet now shows what that means.

What SoftBank paid for, and what it lost

According to SoftBank's financial report, a unit called Silver Bands 7 paid about $9.5 billion, starting last fiscal year, to reserve factory capacity and buy power equipment. The projects it serves include the PORTS-Pike Technology Campus in Pike County, Ohio.

That site is very large. The U.S. Energy Department said earlier this year that SoftBank's SB Energy plans 10 gigawatts of new generation there, including 9.2 gigawatts of natural gas, to feed a data center of similar size. Japan is to fund $33.3 billion of the gas plants under a U.S.-Japan trade agreement.

SoftBank said the unit changed its buying strategy to fit the needs of current and planned projects. The result was $2.85 billion of non-refundable advance payments written off, plus $880 million for contract changes and settlements. About $6.6 billion of the money already paid stays assigned to equipment SoftBank still plans to use.

There is a partial offset. SoftBank may receive up to $2.1 billion in rebates on future equipment purchases over ten years. Those rebates come with conditions, and the company has not counted any of them as an asset.

The advance payments could not be refunded once cancelled and also incurred fees, chief accounting officer Kazuko Kimiwada said, according to The Standard. Chief financial officer Yoshimitsu Goto said plans that looked sound a year or two ago often have to change. He said there is no plan to downsize the Ohio project. But it is under what he called "a thorough reassessment," including how SoftBank buys equipment.

Goto also rejected a claim Elon Musk posted on X on November 6 that SoftBank was defaulting on its turbine orders. "There is no such default," Goto said. Musk offered no evidence, and SoftBank has not said which suppliers' contracts were changed.

Why turbine makers' shares fell

Investors read the charge as a warning about demand for power equipment. Shares of GE Vernova, one of the world's largest gas turbine makers, slid more than 6% on Tuesday, Reuters reported. SoftBank said in May that it had reserved turbines for the Ohio plant from makers including GE Vernova, the research site TIKR noted. Fuel-cell maker Bloom Energy and power and cooling supplier Vertiv each fell about 3%, according to TIKR.

The concern is less about one customer than about how the supplier's cash is generated. GE Vernova had 122 gigawatts of gas equipment under contract at the end of September, and is aiming for at least 130 gigawatts by year-end. Of its $5.4 billion in third-quarter free cash flow, $5.3 billion came from working capital, mostly customer down payments, TIKR noted.

Put plainly, customers paying early are funding much of the supplier's cash flow. If buyers start trimming reservations, that cash slows, even if the deposits already paid stay with the seller.

There is a counterargument. GE Vernova says its deposits and slot reservations are non-refundable, and turbines remain hard to get. TIKR's analyst expects that any GE Vernova slot SoftBank gives up would be resold, with the supplier keeping the deposit. On that reading, SoftBank took the loss and the supplier kept the money.

Others are still placing large bets

Not everyone is pulling back. On the same day, gas exporter Venture Global said it plans to order its first gas "power island," a self-contained plant that runs off the public grid, before year-end, and a second early next year. It has framework agreements with GE Vernova and Baker Hughes for up to 16 such units of about 720 megawatts each.

Venture Global expects its first 250 megawatts to come online in late 2028 and is targeting about 5 gigawatts by the end of 2031. It has not named a customer, and says it will add capacity as investment-grade customers sign on. A regulatory filing valued the full equipment agreements at about $17.2 billion if every purchase goes ahead, though most remain conditional, Oilprice.com reported in October.

The contrast carries a lesson for anyone financing these projects. Reserving equipment early buys a place in line. It also creates a liability if the project's plans change, as SoftBank's did.

Goto also said SoftBank needs to watch closely how the U.S. midterm elections affect sentiment toward AI. SoftBank's financing costs also more than doubled in the quarter, a separate pressure on how much it can keep pre-paying for gear.

What to watch next: whether the Ohio reassessment leads to a smaller campus, whether other developers disclose similar charges, and whether GE Vernova reports cancelled or reassigned slots when it next updates its backlog. For now, SoftBank's loss is one data point, not a trend. It still puts a concrete number on that risk.