Why this analyst thinks investors have got it wrong on data centres
Greg Boorer, the chief executive and founder of CDC
“Waning faith” in the nation’s data centre market will be short-lived according to analysts who believe “good” market updates have not been met with the right responses from investors.
The market got the “wrong messages” when Chinese AI company DeepSeek launched its latest model in January and investors punished the likes of local data centre operators NextDC and Goodman Group, according to E&P analyst Paul Mason.
Mr Mason described the past few months as “something of a bear market” and added that investors had been heavily spooked by “headlines”.
“We think this waning faith is relatively short-sighted, and has been misinformed by certain headlines that were overemphasised and also by the market really getting the wrong messages from the DeepSeek R1 model release earlier in the year,” he said.
DeepSeek’s latest model shed $1 trillion off the market value of Nvidia shortly after launching as investors aired concerns about how a Chinese company could build a powerful AI model without access to Nvidia chips.
Its impact began to fade as world governments including in Australia and major companies including TPG and Commonwealth Bank banned employees from using it.
E&P, in a new report by Mr Mason, believes that growth figures around data centres still depict a strong investment thesis. “Commentary from the hyperscalers has indicated substantial end-user adoption and utilisation as well, meaning the revenue streams supporting the major capex expansions look fundamentally robust and sustainable,” he said.
In 2024, hyperscalers – including Amazon Web Services, Microsoft, Google, Apple and Meta – spent record sums on capital expenditure and some have committed to spending as much as 40 per cent more in 2025.
The report notes Microsoft AI business will grow 175 per cent this financial year while Amazon’s capital expenditure will approach $US100bn ($156bn) and Google owner Alphabet plans $US75bn in capital expenditure.
Local players are also increasing growth plans and looking to expand in what appears an ever growing market.
In February, Goodman Group raised $4bn to double down on a plan to get 500 megawatts of data centre capacity at least under construction by mid-2026.
Canberra-based CDC was valued at $17bn as one of its largest shareholders Commonwealth Superannuation Corporation sold a 12.04 per cent stake to Future Fund and Infratil.
That sale rocketed its founder, Greg Boorer, up the rich list with his stake in the company now valued at $622m.
AirTrunk has also doubled down on its investment in Malaysia, having upped its commitment to the region to $3.5bn as it detailed plans for a second data centre, a 270-megawatt facility to be built in Iskandar Puteridis.
