SoftBank bought US$9.5 billion of generators for America’s AI boom, changed its plans and lost US$7 billion in a quarter

SoftBank has spent the past two years telling investors it would be at the centre of the AI build-out. Its latest quarter shows what that costs when plans change.

The company reported a net loss attributable to shareholders of ¥1,115.3 billion for the three months to 30 September. Net sales rose 15.6 per cent to ¥2,215.4 billion, but that was swamped by losses below the line. For the first half of the financial year, SoftBank lost ¥768 billion, compared with a ¥2.9 trillion profit a year earlier.

Where did the money go?

The largest item was power equipment. A SoftBank and Vision Fund 2 vehicle called Silver Bands 7 had paid ¥1,500.9 billion (about US$9.5 billion) by 30 September for generators and other gear for US AI data centres, including the PORTS-Pike site in Ohio, which SoftBank leased in full to OpenAI for 20 years in August. The company said the vehicle had revised its procurement strategy given the changing needs of existing and planned projects.

That change cost ¥597.2 billion (about US$3.7 billion): ¥457 billion of non-refundable advance payments plus ¥140.2 billion in contract changes and settlements. Another US$6.6 billion of advance payments remains on the books, which SoftBank expects to recover through project financing.

The second hit came from Intel. In August SoftBank raised US$7.4 billion through forward contracts secured on its Intel shares. Intel’s share price then rose, producing a ¥321.9 billion derivative loss, alongside a separate ¥270.1 billion valuation loss on the shares themselves.

What about OpenAI?

SoftBank’s US$64.6 billion bet, about 13 per cent of the ChatGPT maker, made no money on paper this quarter because its valuation was unchanged from March. At 30 September, the US$54.6 billion invested to that date was carried at US$99.6 billion. A final US$10 billion tranche went in on 1 October, completing a US$30 billion follow-on committed in February.

That leaves SoftBank’s profits swinging on OpenAI’s valuation, which moves only when OpenAI raises money, while its costs of funding the bet arrive every quarter.

Why should investors outside Japan care?

SoftBank is one of the largest single sources of money behind the AI data centre build-out, and its results are a rare look at the plumbing: who pays for the generators, the land and the leases before the AI companies do. A write-off of this size suggests even the biggest backers are still working out what those projects need.

The company’s net asset value fell to ¥59.8 trillion from ¥72.3 trillion at 30 June, and its loan-to-value ratio rose to 15.9 per cent from 13 per cent, still under its 25 per cent ceiling. It held ¥5 trillion in cash against ¥1.6 trillion of bonds due over the next two years. The cost of insuring SoftBank’s debt against default reached a four-year high last week.

How did the market react?

SoftBank shares jumped about 14 per cent in Tokyo on Tuesday as Asian chip stocks tracked Wall Street’s overnight rebound, after a steep fall in early November. The shares had almost halved since the start of June as investors cooled on AI stocks.