GE Vernova and Bloom Energy shares plunged Tuesday after SoftBank Group disclosed a $3.7 billion charge tied to power equipment procurement. We asked whether this write-down, cancellation, or "revised procurement strategy" in the AI spending boom could signal trouble ahead in a note titled "Masa's $3.7 Billion Bonfire: SoftBank Posts $7 Billion Loss After Torching Deposits On AI Power Gear As Interest Costs Double."
SoftBank's disclosure followed Elon Musk's claim last week on X that Masayoshi Son's investment group was "defaulting on their turbine orders," an allegation SoftBank denied.
For GE Vernova, however, the cancellation scare runs into a massive backlog. The company had 122 gigawatts of orders at the end of the third quarter, is targeting at least 130 gigawatts by year-end and is booking projects through 2031.
GE Vernova and Bloom Energy are under pressure as traders price in the risk that SoftBank's procurement woes could signal a bigger retreat and/or spread ...
UBS industrials and materials sector specialist Allyson Gordon addressed SoftBank woes and the selling pressure on GE Vernova and related stocks in a note:
GE Vernova is under pressure after SoftBank took a $3.7bn write-down on data center equipment, with the market extrapolating that news to potential turbine cancellations.
The counterargument is that GE Vernova is already booking projects through 2031 and had 122GW of backlog as of 3Q, versus a year-end target of at least 130GW, suggesting it could absorb some cancellations. Given current demand, there are also likely plenty of customers willing to take available turbines, potentially at higher prices.
Some client feedback is also questioning how much should be extrapolated from SoftBank specifically. That said, the market is clearly not in a forgiving mood, with concerns that this could be the first shoe to drop and lead to broader contagion.
Importantly, while AI Industrials are under pressure today, several individual names, including Comfort Systems USA, Johnson Controls, and Trane Technologies, are holding in relatively well. As a result, weakness in GE Vernova and Semiconductors (SOX) is not dragging the entire AI complex aggressively lower.
Long before Musk's comments about SoftBank's turbine orders and today's $3.7 billion power equipment charge, we identified some of the first cracks in the "Powering Up America" theme when SoftBank subsidiary SB Energy delayed an IPO targeting a valuation of $50 billion after bankers struggled to attract demand.
In fact, Goldman's "Power Up America" basket topped out over the summer, along with odds of Democrats winning both chambers of Congress. As of last week, the worst-case scenario unfolded for data centers in a Democratic sweep. The basket is down roughly 25% from its spring and early-summer highs near 265 to about 199.
Well, the collapse in token prices this summer and the surge in Chinese open-weight models, which have grabbed market share from US frontier models, such as OpenAI, may have also had something to do with it.
Separately, JPMorgan analyst Julian Mitchell said the write-downs could weigh on sentiment across energy equipment suppliers exposed to AI spending. GE Vernova's 2031 backlog may allow it to redirect equipment to other buyers if customers delay or cancel orders. Still, cancellations raise serious questions about the spending commitments underpinning the AI boom.