Will SoftBank’s $500 billion Ohio AI Power Campus plan change the story for SoftBank Group (TSE 9984)?

• SoftBank Group recently broke ground on a roughly US$33 billion natural gas power generation facility on the site of the former Department of Energy Portsmouth in Ohio, forming the backbone of a planned US$500 billion AI-focused data center campus with up to 10 gigawatts of capacity.
• The move marks a significant expansion of SoftBank’s role from investing in communications and technology to owning critical energy and computing infrastructure in the United States, in partnership with federal agencies and local governments.
• Here we consider how this expansive Ohio AI energy and data campus plan could reshape SoftBank Group’s AI-focused investment story and risk profile.

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Summary of SoftBank Group’s investment story

To own SoftBank Group, you need to believe in the company’s ability to translate a complex combination of AI, communications, and investments into increased net asset value while managing leverage and volatility. Ohio’s AI Energy and Data Campus highlights a shift toward ownership of hard infrastructure, which could further increase scale and concentration risks on top of already large exposures to capital-intensive AI projects. For now, the main near-term drivers remain monetization of AI-related assets and share buybacks, with balance sheet risk being the main concern.

Among recent announcements, the Ohio project most clearly intersects with SoftBank’s existing AI infrastructure that powers initiatives such as the Stargate UAE campus, which targets up to 5 gigawatts of computing capacity. Collectively, these projects could impact how we think about a company’s capital intensity, capital needs, and timing of portfolio monetization, especially given the consensus that profits are expected to decline over the next three years despite strong currently reported profitability.

But one underappreciated risk behind Ohio State’s bold AI build-out that investors should be aware of is how the increased project commitments will impact SoftBank’s already elevated leverage and refinancing needs…

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The SoftBank Group’s forecast is that by 2028, sales will be 8,650.2 billion yen and profits will be 620.6 billion yen. This would require annual sales growth of 5.5% from the current 1,731.4 billion yen, and a decline in profits of 1,110.8 billion yen.

We reveal how SoftBank Group’s forecasts yield a fair value of 5,360 yen, 51% higher than the current price.

explore other perspectives

While the consensus focuses on balance sheet distortions, the most optimistic analysts, who assume revenue of about 9,281 billion yen and profits of nearly 1,530 billion yen by 2028, see projects like Ohio as evidence of SoftBank’s potential as a linchpin in AI infrastructure, illustrating how different companies weigh the same news when looking for alternative perspectives.

Take a look at five other fair value estimates for SoftBank Group – find out why the stock is worth 62% more than its current price.

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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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