Tech & AI
SoftBank swings to a loss on AI data center writedown
SoftBank swung to a fiscal second-quarter net loss after writing down advance payments for U.S. AI data center power equipment. Higher financing costs and falling stakes such as Intel added pressure.
Quick Read
- SoftBank swung to a fiscal second-quarter net loss from a profit a year earlier, even though revenue beat the LSEG estimate, CNBC reported.
- The largest single hit was a writedown on advance payments for U.S. AI data center power equipment, and SoftBank is reassessing its procurement, Bloomberg reported.
- Higher financing costs and falling listed stakes, including Intel, Coupang and Grab, also weighed on the quarter.
- Intel shares slid on Tuesday and remain well below their 52-week high.
What did SoftBank report?
SoftBank Group reported a fiscal second-quarter net loss of 1.12 trillion yen, or $7 billion, on Tuesday. A year earlier, the tech investor booked a profit of 2.5 trillion yen.
Why it matters: Sales were not the problem. Revenue beat the LSEG estimate, CNBC reported. Six-month revenue grew on telecommunications and AI computing, according to CNBC. The damage came from writedowns, interest bills and investment losses.
Why did SoftBank lose money?
The biggest single hit was a $3.7 billion writedown. A writedown cuts the value of an asset on the company's books. This one covered nonrefundable advance payments for power-generation equipment meant for U.S. AI data center projects.
SoftBank paid early to lock in that equipment, then changed its procurement plans. CFO Yoshimitsu Goto said the company moved early on worries about shortages and long waits for delivery. SoftBank is now reassessing how it buys equipment, Bloomberg reported.
Borrowing also got more expensive. SoftBank raised a record sum in the quarter to fund data centers, robotics and OpenAI, Reuters reported. Its interest expenses climbed sharply.
Its Vision Fund unit posted a loss. Gains on ByteDance and other private stakes fell short of declines in listed holdings such as Coupang and Grab.
Where does Intel fit in?
Intel (Nasdaq: INTC) is among the investments whose decline weighed on SoftBank's quarter, the company's results showed.
On Tuesday, Intel shares slid 2.1% to $58.13, a loss of $6.6 billion in market value. The stock sits 58.8% below its 52-week high of $140.94. Even so, $1,000 put into Intel a year ago is now worth $1,512.
Intel makes up 0.35% of the value of the 500 largest U.S. companies. Its drop took $7 from $100,000 spread across them by size.
What comes next for SoftBank's data center plans?
What’s next: SoftBank clarified that the writedown was unrelated to its Ports-Pike project in Ohio. OpenAI has agreed to a long-term lease at that site.
Reuters reported that SoftBank could receive rebates on future purchases. The open question is whether the procurement review slows SoftBank's AI building. Its next quarterly results could show how much of the writedown those rebates recover.
For readers
What it could mean for you: SoftBank's U.S.-traded ADRs are receipts for its Tokyo shares. If you own them, the writedown and rising interest bills land in full, with no other holdings to offset them. Those costs could weigh on results while SoftBank reassesses how it buys data center equipment. If you own Intel directly, its slide reached you in full as well. SoftBank's next results may show whether the rebates Reuters reported offset part of the hit.
Questions and answers
Why did SoftBank report a loss this quarter?
The main cause was a writedown on nonrefundable advance payments for power-generation equipment for U.S. AI data centers. Higher financing costs and declines in investments, including Intel, also weighed.
Does the SoftBank writedown affect its Ohio data center project?
No. SoftBank said the writedown was unrelated to its Ports-Pike project in Ohio, where OpenAI has agreed to a long-term lease.
Could SoftBank get any of the money back?
Possibly. Reuters reported that SoftBank may get rebates on future equipment purchases. How much of the writedown that recovers has not been shown yet.
How much did Intel's drop affect a broad stock index fund?
Intel is a small slice of the 500 largest U.S. companies' combined value. Its Tuesday decline moved a fund spread across them by size only slightly.
The numbers
| Intel (INTC) price | $58.13 |
|---|---|
| Intel (INTC) change | −2.09% |
| Intel (INTC) market value | $310 billion |
| Intel (INTC) 52-week high | $140.94 |
| S&P 500 change | −0.38% |
| 10-year Treasury yield | 4.98% |
Tuesday’s close
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