SoftBank shares tumble after turbine loss, midterm rout

SoftBank Group's US artificial intelligence buildout is facing new political and financial strain. Democrats' sweeping midterm victories raised the prospect of tighter data center rules in states where the company is building, and the company spent the week rejecting Elon Musk's claim that it had defaulted on turbine orders. According to The Korea Herald, which cited a Nikkei analysis published Wednesday, the results have clouded the outlook for both SoftBank's data center projects and its investment in OpenAI. The Herald put SoftBank's total AI commitments at more than $119 billion.biz.heraldcorp.com

Midterms shift the ground

Democrats won control of both the House and the Senate on November 3. Opposition to data centers became a major campaign issue. Gina Hinojosa in Texas and Amy Acton in Ohio both won governor's races after campaigning to restrict data center development. Those two states are central to SoftBank's plans. Its subsidiary SB Energy is pursuing five data center projects there, and construction has not started on about 90% of the buildings. The Texas governor-elect has pledged to halt new approvals, and Ohio's has promised conditional delays.en.fnnews.com+3

Financing is also less certain. OpenAI filed for an initial public offering in June but has pushed its listing to 2027 or later, and SB Energy has not set a listing date since releasing its prospectus in September. The Nikkei warned that "the more investment is concentrated in the U.S. AI market, the greater the shock if it fails".en.fnnews.com

Musk claim and quarterly loss

On November 6, Musk posted on X that "SoftBank is defaulting on their turbine orders". At SoftBank Group's earnings briefing on Tuesday, November 10, Chief Financial Officer Yoshimitsu Goto called the claim "completely unfounded." He said he had no idea why Musk made the post, that SoftBank was not in default, and that its AI infrastructure plans would continue on schedule.itmedia.co.jp

The same results showed a ¥597.2 billion charge, about $3.7 billion, after SoftBank revised its plans to buy power-generation equipment for US data centers. According to The Wall Street Journal News Corp ↗ 0.40%, SoftBank had reserved more than 13 gigawatts of turbines and then canceled its remaining reservations with GE Vernova ↗ 1.41%. SoftBank posted a net loss of ¥1.1153 trillion for July through September, its first quarterly loss since late 2024.tomshardware.com+2

Markets react

SoftBank shares fell sharply on the Tokyo Stock Exchange Japan Exchange Group, Inc. on Wednesday after the results. The drop came as Japan's Nikkei 225 fell to a more than three-month low on worries about US data center regulation.economictimes.indiatimes.com+1

Chairman Masayoshi Son has shown no sign of retreating. Speaking last month, he said the question of whether AI is a bubble "itself is wrong," adding, "This is still just the beginning".biz.heraldcorp.com