Towards the end of September, SB Energy, a data center and energy developer backed by SoftBank, postponed its initial public offering (IPO) roadshow. Despite having secured substantial data center leases, the company faced additional regulatory inquiries and investor scrutiny over its valuation and heavy reliance on OpenAI. Meanwhile, during the same period, DayOne and Switch, both of which already manage data center parks, were pressing ahead with their IPO preparations.

Recently, Oracle reportedly sent a "force majeure" notice to data center developers, asserting its right to defer payments if projects are not commissioned on time. As developers continue to seek funding for expansion, cloud providers, as their primary clients, are starting to define the limits of their exposure to delivery risks.

These developments come amidst a persistent shortage of data center space. Data from CBRE for September indicates that the vacancy rate across eight major North American data center markets stood at just 1.4% in the first half of the year, with over 80% of the capacity under construction already pre-leased. Despite the expectation of full occupancy, not all projects receive uniform financing.

Long-term leases ensure future revenue streams, but developers must shoulder construction costs for years upfront, with power supply or engineering delays further prolonging the funding period. Consequently, capital providers have begun distinguishing between platforms with existing operating revenues and those dependent on long-term contracts with a limited number of clients. Financing arrangements now take into account client prepayments and chipmaker guarantees. Competition among data centers now extends to the allocation of construction risks: only those who can secure power, arrange funding, and assume delivery responsibilities can convert AI computing orders into server deployments.

01 Why Long-Term Contracts with Major Clients Are No Longer Sufficient

In its updated prospectus on September 21, SB Energy revealed that of its 8.8 GW of signed IT capacity, 0.8 GW was under construction, 8 GW had not yet commenced, and none was operational. The company possesses operating solar and energy storage assets but has yet to generate operational rent from data centers. All this capacity is tied to entities affiliated with SoftBank and OpenAI, with 8 GW concentrated in a single Ohio park leased by OpenAI.

To fulfill these contracts, the company anticipates investing $174 billion over the next six years in data center construction. The 8 GW park is under a 20-year lease but will be rented in phases by building, contingent on power supply availability, building completion, and commissioning. Having a few major clients reduces leasing uncertainty but does not eliminate the rent-free period from construction to delivery.

Construction costs and interest must be paid upfront. If initial rent collection is delayed, subsequent construction still depends on external financing, with interest payments consuming the next budget cycle. Delivery issues with one project can impede the entire park's expansion.

On September 25, it was reported that DayOne plans to file for a U.S. listing in mid-October, aiming to go public in November, while Switch anticipates a later offering with a timeline yet to be formally announced. DayOne already operates a park in Malaysia and has a presence in multiple Asia-Pacific and European markets, with financing facing a mix of existing operations and new projects.

Operating assets provide rental income and operational records, enabling investors to avoid basing judgments solely on whether a large park can be completed on schedule. Ke Yan, head of research at Shenton Research, noted that investors prioritize signed capacity with secured power supply, near-completion or operational status, and long-term paid contracts.

Platforms under construction rely primarily on future income to support valuations. As financing costs rise, the same future rent can support less upfront investment. If new funds are continuously borrowed to cover construction payments, financing terms will dictate how much a project can expand.

On September 30, Accelevation, which provides power distribution, cooling systems, and installation services for data centers, went public on Nasdaq at $18 per share, below its previous roadshow range of $20 to $24. The IPO window remains open, but companies must now concede on price. For developers continually relying on external funding for expansions, sustained pressure could mean lower valuations, additional guarantees, or phased construction.

02 Self-Built Power Supplies Also Encounter Approval Challenges

Oracle's notice was sent to the developers of the Project Jupiter park in New Mexico, including a Blue Owl affiliate. The park, scheduled for commissioning in 2028, is facing approval delays for its power supply. Oracle emphasized that the project remains on schedule, while Blue Owl stated that financial commitments remain unchanged, with no final conclusion on payment responsibilities in case of potential delays.

The plan involves using Bloom Energy's natural gas fuel cells to generate electricity through electrochemical reactions, reducing reliance on new public grid capacity. However, a stable natural gas supply is still required, with the matching pipeline originally scheduled for September 2024 commissioning now delayed to February 2027 due to permitting issues.

On September 14, Oracle clarified that the data center and its power microgrid are adjacent but independent facilities operated by different companies. The judicial proceedings involve air emission permits for the microgrid, not building permits for the data center, which can continue construction. However, power activation depends on a separate approval timeline.

If tenants can defer payments, financial pressure during construction remains with developers. Lenders thus scrutinize not just lease terms and amounts but also occupancy conditions, delay liabilities, and whether guarantees cover these risks.

On September 21, the Texas governor requested the state environmental quality commission to pause issuing data center-related permits pending grid and water resource reviews. Even if developers secure clients and power sources, new projects must still meet local power reliability and water resource requirements, with ample budgets not guaranteeing approvals.

DayOne is also seeking additional power sources. On September 2, the company announced a collaboration with a power generation subsidiary of Malaysia's national energy company to explore building up to 1.5 GW of on-site generation with storage in Selangor. The plan still requires feasibility studies and approvals, with existing operating assets not exempting subsequent expansions from power constraints.

Morgan Stanley raised its forecast for U.S. data center power demand growth from 2026 to 2028 to 97 GW in September. After accounting for capacity under construction, grid supply, and on-site generation accelerators, a cumulative gap of about 33 GW is expected by 2028, with alternative power solutions unlikely to cover all construction needs.

GE Vernova, a power equipment manufacturer, disclosed on September 16 that it had sold multiple production slots for gas turbines delivered in 2032. The company also noted that some projects hope to connect to the grid in five to seven years but lack firm commitments. On-site generation may persist for years, with equipment delivery timelines and fuel security becoming long-term constraints.

On October 1, Japanese power generator JERA, Dell, and AI infrastructure developer RHAELM announced a memorandum of understanding to deploy AI infrastructure with up to 400 MW of power capacity using an existing plant in Chiba, targeting commissioning around 2028. The project will use behind-the-meter power supply, leveraging existing generation facilities to reduce wait times for new grid connections, with Dell providing standardized rack solutions and RHAELM handling development and delivery.

JERA provides the plant and site, while Dell engages in computing equipment solutions before data center completion, aiming to reduce design and integration times for power, cooling, and servers. Locations with favorable power conditions can attract clients and equipment partners earlier, while parks still awaiting grid connections or turbine deliveries face longer funding periods.

03 Clients and Chipmakers Share Financial Burden

Oracle disclosed that as of September, its Abilene, Texas, data center had delivered 75% of its total capacity. While operating parks and upcoming projects advance in parallel, cloud providers are also asking clients to share upfront investments.

Oracle's financial results released on September 10 showed cash capital expenditures of about $28.5 billion in the latest fiscal quarter, alongside about $11.4 billion in client prepayments with significant financing components. Management stated that most new large AI contracts adopt client prepayment or bring-your-own-hardware arrangements, with these new contracts not affecting capital expenditures or revenue until fiscal 2028 or later.

Prepayments reduce Oracle's upfront funding for equipment procurement and deployment, while bring-your-own-hardware shifts some GPU procurement responsibilities to clients. Thus, changes in cloud providers' capital expenditures do not directly equate to fewer chips being purchased for projects. Clients still need to finance prepayments and hardware, with their financial strength continuing to influence contract fulfillment.

GPU cloud provider CoreWeave disclosed on September 17 that its asset financing is supported by long-term 'take-or-pay' client contracts, GPUs and other equipment, and data center leases, with funds drawn in phases as costs are incurred and infrastructure deployed, and contract proceeds used to repay loans, with the company planning full repayment before contract expiration. Client creditworthiness and equipment value together determine the financing base, with the same number of GPUs potentially subject to different funding terms depending on tenants and contracts.

CoreWeave divides data center development into two phases—construction, grid connection, and electromechanical cooling—and GPU installation and testing. Chip procurement must align with data center delivery: early arrival increases capital occupation, while late arrival affects service contracts, with phased financing needing to coordinate with equipment deployment.

SB Energy's prospectus revealed that NVIDIA has provided residual value guarantees for the initial ~4.25 GW IT capacity at its Ohio park. In cases such as tenant bankruptcy or unremedied payment defaults, NVIDIA can take over leases or demand re-leasing, with asset sale requirements if re-leasing fails. Guarantees have caps, with payouts contingent on delivery conditions, and cannot cover all construction risks.

SoftBank and OpenAI are simultaneously investors in and tenants of SB Energy, while NVIDIA provides credit support, with roles overlapping among these companies, facilitating funding and order organization but also interlinking risks. The prospectus cautions that financial deterioration among related parties could simultaneously affect tenant payments, guarantee performance, and partnerships. Chipmakers thus assume responsibilities beyond sales, with multiple procurement entities not necessarily representing independent demand.

On September 30, data center developer and operator AIB announced a binding agreement with AI cloud provider Nebius to supply 50 MW of IT capacity. AIB had previously secured a 15-year power supply agreement for this U.S. Southeast project, covering 65 MW of grid load, and stated that no major new power infrastructure upgrades were needed. Nebius also cited power conditions as a key factor in site selection.

AIB expects client prepayments under the initial 12-year contract, along with project loans and preferred stock financing, to cover most initial development costs, reducing common stock financing needs. The power supply agreement helped secure the long-term lease, which in turn supports organizing construction funds. Power first influences client choices, then financing structures, and is not merely an operational cost post-commissioning.

For GPU, HBM, and network chip suppliers, projects with secured power and funding can schedule procurement around delivery dates, while parks still reliant on subsequent financing are more likely to adjust batches or delay deployments. Even if client demand remains unchanged, originally planned equipment orders may be spread across different quarters for delivery.

04 Conclusion

Data center shortages create demand for expansions but do not eliminate funding and delivery risks during construction. Gaps created by power conditions, client creditworthiness, and financing capabilities will ultimately determine who can first deliver computing power and who can sustain chip procurement.