Why SoftBank Is Rushing SB Energy to the Public Markets
People used to complain that some private tech companies waited too long to go public. Thanks to the AI boom, now we’ve got tech companies going public with hardly any operating business at all. The latest example of that is SB Energy, a SoftBank-controlled solar and battery power firm that filed to go public on Tuesday.
SB Energy proudly proclaims, in big text early on in its IPO filing, that it is “Building World-Class Data Center and Power Infrastructure.” The key word there is “Building.” In much smaller print, nestled within vast reams of text extolling the virtues of its approach to AI data centers, is this phrase: “No data center capacity is currently in operation.” The only revenue SB Energy currently generates—a total of $213.5 million last year—came from solar and battery power generation projects. And assuming it builds the data centers it is planning over the next couple of years, SB Energy will only have one outside customer—OpenAI.
So far, to fund its data center ambitions, SB Energy has borrowed several billion dollars and raised equity from, among others, OpenAI and Nvidia. (The AI chip giant is also providing a financial backstop to SB Energy’s biggest data center project, located in Ohio, in case OpenAI can’t pay its bills.) You might wonder why SB Energy is going public right now. After all, its parent is a public company—why sell stock in such an early-stage subsidiary? No prizes for guessing the answer: SoftBank needs the money. The Japanese investment conglomerate is on an AI spending spree, raising money however it can, by either selling assets or borrowing against them. (Remember, SoftBank has borrowed money to invest in OpenAI and now plans to borrow more money using its OpenAI shares as collateral!)
Is SB Energy something any investor should touch? For sure, its marketing pitch—that it focuses first on getting power lined up for its data center projects rather than treating power as an afterthought—is perfectly timed for this moment. Elon Musk has been banging the drum lately about the energy crisis facing the data center industry, pointing out in a virtual appearance at a G20-related event on Tuesday that the tech industry faces a “crisis of power,” which will lead to a shortage of the power required to turn on chips next year. In that scenario, data centers developers whose projects already have power connections will be ahead.
But there’s plenty of reason to be wary of SB Energy. It’s hardly confidence-inspiring that the campus nearest to completion—by the end of this year—is one in Travis, Texas, that an affiliate of SoftBank itself will be leasing. SoftBank has announced plans to launch its own neocloud, by the way, so that’s presumably the purpose of this campus. (SB Energy also has to pay 1% of its gross profit to SoftBank as royalties under a trademark deal, which won’t help its profitability.)
Then there’s SB Energy’s dependence on OpenAI. SB has three other data center campuses under development, the biggest of which hasn’t even begun construction, that OpenAI will lease. (SB has land for a couple of other projects, but those are in too early a stage to have customers lined up yet.) And to think some investors have complained about CoreWeave’s reliance on a handful of customers!
In that sense, SB Energy is simply another way for SoftBank to support OpenAI. If investors want exposure to AI, they can buy into Nvidia, or OpenAI when it goes public (expected next year) or—if appetite for risk is unlimited—SoftBank itself. What does SB Energy really offer?2Musk’s MarketingMusk’s Marketing