Australian AI data centre operator NextDC shares shed 44% on revenue delay

Australian data centre operator NextDC experienced a significant 44% decline in its market capitalisation on Wednesday, following the company's announcement of reduced revenue forecasts and a halt to future projects. The reason for this downturn was the delay in electricity network upgrades at one of its major Melbourne assets, which would result in approximately A$140 million worth of contracted customer revenue being deferred this financial year.

In response to the situation, NextDC announced plans to postpone all new development projects and land acquisitions for the foreseeable future, and evaluate potential capital recycling opportunities, which could include selling selected development sites.

The news sent NextDC shares plummeting 44% and erasing about A$3.1 billion from its market value in early trade, making it the biggest loser on the broader ASX200 benchmark index. The stock is now trading at its lowest level since January 18. The decision to delay revenue and development projects highlights the challenges faced by data centre operators amidst the surge in AI spending, as investors question whether the massive investments can justify soaring costs related to computing, land, and power.

Signs of strain are beginning to emerge in some of these investments, with a data centre IPO being withdrawn in Australia last week and credit investors becoming more selective towards AI-linked companies.