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    NEXTDC (NXT)

    Hi guys You recently bought nxt and obviously you like this company and i agree that demand is increasing rapidly with aI. But i do have a few concerns with this company as in its recent report it pointed out that more companies are targetting data centres and with it competition for staff. Obviously this will push wages higher and therefore costs. Also i note these data centres are extremely power hungry and i cant see power getting cheaper anytime soon ,in fact it has continued to be more expensive. I like the data centre story but these few negatives make me cautious about investing in nxt. Your thoughts please Thanks Tony

    Answer

    Hi Tony,

    Competition from the likes of Goodman Group (GMG) and Digico Infrastructure REIT for investors funds for data centre exposure has been one of the reasons for the ~18% pullback in the stock which has afforded us an entry opportunity we like.

    The two points you mention are interesting but not overly concerning at this stage to MM:

    • Staff – we agree competition has pushed up the cost of expertise, but with less than 300 employees delivering over $400mn in revenue in FY24 its not a metric that will significantly push the dial on execution for NXT.
    • AI/Energy – we all know how power hungry AI will be with the US Tech Goliaths already turning their attention to a nuclear solution but we believe NXT will simply pass this cost on to customers.

    We still believe that AI is in the “picks & shovels” stage of its evolution which points to data centres as the place to invest for now but as always the baton will be passed in time.

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    NEXTDC Ltd (NXT)
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