SoftBank’s Overinvestment in Natural Gas Turbines Highlights AI's Energy Market Challenges

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SoftBank's $3 billion loss on excess natural gas turbine orders signals the complexities of meeting AI data centers' soaring power needs and may slow natural gas power plant development.

SoftBank's aggressive strategy to secure natural gas power for AI data centers has encountered significant financial setbacks, underscoring the evolving challenges of powering the AI boom. In early 2025, SoftBank made a $30 billion investment in OpenAI and shortly after committed its SB Energy division to a $33 billion project aimed at constructing a 9.2-gigawatt natural gas power plant. This approach was consistent with SoftBank CEO Masayoshi Son’s philosophy of not just entering a trend but aiming to dominate it.

To accelerate project timelines amid global turbine shortages, SoftBank placed deposits on over 13 gigawatts of natural gas turbines—approximately 50% more than required. Peter Gardett, CEO of Noreva, explained that over-ordering was necessary to obtain immediate turbine availability due to extensive wait times that now stretch into the early 2030s.

However, this strategy resulted in a heavy financial toll. SoftBank recently reported a $7.1 billion quarterly loss, with more than half linked to power equipment, primarily nonrefundable turbine deposits now considered largely worthless. Gardett characterized this loss as a form of price discovery in a challenging market where rapid AI power demand outpaced expectations.

The broader AI sector has turned to natural gas as a dependable energy source due to long grid connection delays, treating it as an 'energy security blanket.' Yet, industry experts like Brent Nelson from Ascend Analytics caution about risks such as seasonal curtailments when gas supply tightens during demand spikes.

Nelson advocates for a hybrid approach where AI data centers primarily rely on grid connections supplemented by large battery systems. Such batteries could mitigate peak loads and manage utility-driven demand reductions, affording greater flexibility than sole reliance on natural gas.

This evolving perspective among data center operators could temper the rapid expansion of natural gas power capacity that SoftBank anticipated. Despite SoftBank’s substantial losses, the company’s experience is unlikely to trigger widespread cancellations of gas power projects, given the potentially enormous electricity needs of AI infrastructure worldwide. For now, natural gas remains a key energy source, although SoftBank’s financial write-down may indicate the sector’s upper limits in this context.