NextDC Earnings: Booming Demand; Valuation Raised to AUD 14 from AUD 12

NextDC’s first-half fiscal 2024 result highlighted a huge wall of customer demand, with customers now discussing larger opportunities than only a few years ago. Previously, it discussed 10-15 megawatt opportunities with customers, but it now discusses opportunities of more than 100 MW. Base-level demand from cloud computing is very strong, with customers discussing demand in 50 MW to 100 MW increments. The potential demand from artificial intelligence could be three to five times larger than this, coming from AI model training and inference. There is not enough supply at scale in the market to meet this demand, with management describing the urgency to deliver the planned capacity of its two Sydney data centers, S4 (targeted 300 MW capacity) and S5 (targeted 60 MW capacity), as critical. With such strong demand, NextDC sees per-unit pricing increasing, with annualized revenue per square meter and per MW reaching record levels in first half 2024.