DigiCo Infrastructure REIT (DGT) $4.22

UBS picked a great a day to initiate on DGT, with the stock down ~11% on a big rout in AI-related names, as the success of DeepSeek in China and their new AI model that was developed for a fraction of the cost (reportedly) and has significantly less chip and energy use, sent shock waves through the sector. That said, we still believe the drivers for data centre demand remain, and while equity risk premiums in the sector will increase, reducing valuations accordingly, the moves across the space yesterday were significant.

While we appreciate that it’s very hard to know how all this will play out given how dynamic and fast-moving it is, we tend to share Citi’s view that DeepSeek most likely drives further demand for data centres globally with advanced computational capabilities, high-capacity storage, robust networking, and energy-efficient designs and infrastructure rather than reduces it, as yesterday’s price action would imply. In other words, the more accessible, the lower the bar, the more use cases from a broader cohort of users.

• UBS were involved in the listing of DGT, and when a broker/bank is mandated to list a company, research restrictions are applied for a set time post-listing. These are now over; however, we’d also caution that a listing broker will generally be positive on the stock they’ve just listed.

UBS initiated with a Buy rating and $5.60 price target, reinforcing that the bigger picture thematic are clear for datacentre demand, being 1) shift from in-house to co-location; 2) shift into cloud computing; and 3) increased data generation from the uptake of AI. DGT is an established player in the space with 13 assets across Aus / the US, with plans for 238MW of datacentre capacity, nearly 70% of which is future expansion /capacity which drives future earnings growth.

We particularly like their SYD1 facility, located in the Sydney CBD, which provides a differentiated offering for latency-dependant compute capacity, i.e. when proximity matters, and the development pipeline is solid. While it’s only early days on the listing, we reiterate that DGT looks attractive into current weakness, now trading at a 16% discount to the listing price on the 13^th December 24.