SoftBank’s battery connects AI power demand to new revenue source

• SoftBank Group (TSE: 9984) plans to build a large-scale battery factory in Osaka in cooperation with partners Cosmos Lab and Deltax.
• The facility is intended to supply power solutions for AI-related demands, particularly data centres.
• The group aims to earn significant annual revenue from the battery venture by 2030.

SoftBank Group, a company best known for its investments in AI and technology, is moving further into the physical infrastructure that supports these services. Batteries, as they relate to AI’s power needs, sit at the intersection of two areas that are attracting increasing funding: data centers and energy. By working with specialized partners, SoftBank is focusing some of its growth efforts on equipment and power, rather than just software, chips and platforms.

For investors, this step adds a new line of business alongside SoftBank’s existing investment activities, which can change how you think about the mix of risks and potential cash flows. The scale, timing and execution of this plant is likely to be a key part of TSE:9984’s story for the rest of the decade, as the Osaka project ties the group more closely to long-term trends in AI-related power use and data center construction.

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This battery move brings SoftBank further into the AI ​​hardware supply chain, on top of its investments in OpenAI, Arm, and data centers. By targeting large-scale production in Osaka with Cosmos Labs and Delta For investors, this shifts part of the story from mark-to-market returns and exits to manufacturing execution, customer contracts, and project-level returns. Capital-intensive factories add a new element to the risk-reward mix, as analysts already point to high non-cash returns, expectations for declining profits in coming years, and interest coverage concerns. The group is also pursuing AI infrastructure projects in Europe and the US, so this battery plan fits into a broader push to support physical AI, not just software. How SoftBank properly manages construction costs, capacity increases, and integration with broader AI infrastructure plans will influence whether this new line feels like a useful diversifier or a source of extra volatility.

How does this fit into the SoftBank Group story?

• By expanding SoftBank’s role from AI models and chips to the power systems that keep those data centers running, the Osaka Battery project confirms the existing narrative that future gains could be driven by AI and data infrastructure efforts.
• The presence of large manufacturing operations and additional fixed assets on top of already high leverage and reliance on investment returns also challenges the catalyst that only disciplined financial management will carry the story.
• Early talk has focused on IPOs, exits, and AI equity exposures, which may not fully account for the execution risks of operating industrial facilities where issues such as yield, downtime, and customer concentration are important.

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Risks and rewards investors should consider

• ⚠️ Analysts have warned that they expect earnings to decline on average over the next three years, so adding capital-intensive battery projects could make earnings volatility more pronounced if AI’s power demand or pricing fails to meet expectations.
• ⚠️ Interest payments are not well covered by revenue, so further commitments to factories and AI infrastructure mean the financing structure becomes more important, especially if more debt is used.
• 🎁 Profits have grown very strongly over the past year, with SoftBank recording significant profits from AI-related assets such as OpenAI, showing that the group can benefit if its exposure to AI matches market conditions.
• 🎁 With revenue expected to increase and the stock reportedly trading at a good P/E ratio compared to peers and the broader Japanese market, some investors may view new operating businesses related to AI demand as an additional differentiated growth option.

Future points of interest

From here, it’s worth watching to see how much capital SoftBank ultimately allocates to the Osaka Battery Factory, how it builds partnerships with Cosmos Labs and DeltaX, and whether it discloses visibility into its contracts with AI data center customers. Updates on production schedules starting in FY2027, progress towards the annual revenue target of 100 billion yen by FY2030, and the impact on interest rate coverage will be important for risk assessment. Given SoftBank’s parallel projects in AI data centers and logistics, it will be interesting to see how management accounts for the role of batteries within its broader AI infrastructure plans, and whether exposure to this industry begins to balance out or amplify the volatility from investment returns associated with OpenAI and other portfolio holdings.

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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.

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