Elon Musk was half right in his comment last week about SoftBank backpedaling on a gas-turbine order

By Steve Goldstein

GE Vernova stock declines after SoftBank write-down

An HA turbine at the GE Vernova plant in Greenville, South Carolina. A SoftBank subsidiary is paying in order not to receive turbines.

Elon Musk in a social-media post last week charged that SoftBank "defaulted" on a gas-turbine order. The truth, revealed Tuesday in the Japanese's company's second-quarter earnings, wasn't far off.

SoftBank took a $3.7 billion write-down as a subsidiary investing in infrastructure for AI data center projects in the U.S., including one in Pike County, Ohio, revised its procurement strategy. So while it is true that SoftBank is not ordering as much as it previously planned, it's not breaking any contracts in doing so. SoftBank so far has made advanced payments of $9.5 billion for power projects.

SoftBank said it took a $2.85 billion loss on the non-refundable payments to secure capacity, and another $880 million hit related to contract modifications and settlements.

The subsidiary, called Silver Bands 7, is entitled to rebates of up to $2.1 billion over the next 10 years on future equipment purchases, but SoftBank said those have yet to be determined.

SoftBank has previously named GE Vernova (GEV) as the supplier for the turbines at the Ohio project. GE Vernova stock fell 5%.

"The news is a negative, as it marks a major data-center developer re-thinking its plans for power equipment," said JPMorgan analysts.

They added that it's hard to delineate the precise future of the Ohio project. "In the event that a customer delays some turbine orders / deliveries, we think it is highly likely that [GE Vernova] could use those slots for other customers, as the company is booking power orders for 2031 delivery. "

Musk has frequently chided SoftBank, which is a major investor in OpenAI, the artificial-intelligence company that the world's richest person unsuccessfully sued this year over its transition into a for-profit structure.

SoftBank shares (JP:9984) jumped 14% in Tokyo trade, though the stock is down 29% over the last three months.

"It is primarily an investment business, and its P&L fluctuates with the market environment and timing, so the quarterly P&L is not that important; however, we view the [600 billion yen] loss related to power generation equipment for U.S. AI data center as negative," said Citi analyst Keiichi Yoneshima.

-Steve Goldstein

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11-10-26 1030ET