STOCKS | SoftBank Takes $3.7 Billion Impairment on Failed Small Gas Turbine Bet

SoftBank has recorded a $3.7 billion impairment on power equipment for U.S. data centers after its bet on small gas turbines failed. According to Sina Finance, the Japanese group had ordered more than 13 gigawatts of generation capacity, enough to supply 11 million homes, including many small turbines that are faster to deliver but more expensive and less fuel-efficient than larger models. The impairment, mainly covering the small turbines, followed founder Masayoshi Son’s misjudgment of the timing of the purchases and directly contributed to an unexpected $7 billion third-quarter loss, people familiar with the matter said. Analysts estimated that the impaired turbines could represent more than 3 gigawatts of capacity, based on equipment costs and the $2.9 billion in prepayments SoftBank wrote off. AI companies have used gas turbines to provide independent power for data centers in recent years. Early orders tended to be smaller, less efficient units for backup or supplemental power; the industry now needs larger, more efficient turbines as primary power sources to meet rising AI computing demand. People close to SoftBank said retaining the equipment under the contracts would cost more over the long term than recording the impairment. SoftBank said the Ports-Pike power plant project remains on schedule and is unrelated to the write-off. SoftBank is developing the plant, which is owned by an entity supported by the U.S. and Japanese governments. It is planned to supply a SoftBank data center that OpenAI has leased for 20 years. The project is financed under a $550 billion U.S.-Japan trade agreement. British media reported in March that SoftBank placed an order worth nearly $10 billion with GE Vernova for hundreds of gas turbines. People familiar with the matter said some of the turbines were intended for the Ports-Pike plant in Ohio, while others were ordered in anticipation of demand from future data centers and possible use in projects not yet identified. SoftBank’s stock has fallen nearly 60% from its June peak amid investor concerns that technology companies’ heavy AI infrastructure spending may not match future demand. Mitsubishi Heavy Industries, one of the world’s three largest gas turbine makers, said cooling enthusiasm for AI could hurt manufacturers of small turbines, while projects led by utilities and using efficient equipment could continue. SoftBank said equipment specifications are evolving and energy supplies are becoming more diversified, while delivery times and equipment and installation costs for current models have improved significantly. It added that stronger-than-expected data center demand and improved earnings in other businesses would more than offset the cost of adjusting its earlier orders. In its results released Tuesday, SoftBank wrote down $2.9 billion of $9.5 billion in total prepayments for power equipment. Another $900 million in losses came from contract changes and settlement payments, bringing the impairment to $3.7 billion. The company said it may recover part of the loss through potential refunds of $2.1 billion.