ASX data centre stocks - which are a Buy?

The data centre buildout has become the engine room of the AI supercycle, and Australia is slowly joining the party, both in terms of AI adoption itself as well as data centre infrastructure. 

But the Firmus IPO debacle has hit the sector hard in recent days and left investors jittery, even if local demand for AI services is forecast to grow in the coming years. 

As Goldman Sachs wrote in a recent note introducing its ANZ data centre model, AI demand in Australia and New Zealand could see impressive year-on-year growth to 2030. 

"We project ANZ demand to scale from 1.6GW today to 5.2GW by 2030E (26% CAGR) in our base case, and up to 7.0GW in our bull case (34% CAGR)... This materially outpaces supply, which we project grows from 1.6GW to 4.5GW by 2030E, creating a 0.7GW shortfall."

But the region represents a compelling investment for the AI hyperscalers looking to build.

As part of its model, Goldman Sachs has also initiated coverage on five ASX data centre and digital infrastructure names. Here is how it's seeing them.

1.  Goodman Group (ASX: GMG)

• Rating: Buy
• Consensus rating: Strong Buy
• Price target: $32 (21% upside)

According to Goldman Sachs, property group Goodman has two key qualities that make it a buy as an ANZ data centre play.

The first is a strategic land bank in competitive urban locations underpinned by aligned management. The second is its tight vacancies, positive reversion and stable core income growth driven by its focused pipeline of projects. 

This in turn means it is well-positioned to benefit from data centre acceleration, and Goldman Sachs believes its share of the data centre powerbank could be worth $28 billion against $11 billion implied by its current share price. 

2. Megaport (ASX: MP1)

• Rating: Buy
• Consensus rating: Strong Buy 
• Price target: $25.90 (66% upside)

Like Goodman Group, Megaport's inherent qualities make it a likely beneficiary of the ANZ AI buildout, especially given its "full-stack AI offering" of network, compute and storage. 

According to Goldman Sachs, it possesses a "global network footprint and entrenched carrier-neutral ecosystem [and] a high-margin subscription base that self-funds growth on a largely fixed cost base", and is also listed as a Buy with 66% upside.

3. NextDC (ASX: NXT)

• Rating: Neutral 
• Consensus rating: Strong Buy
• Price target: $11 (23.5% upside)

NextDC has been one of the ASX's clearest AI plays, but Goldman Sachs believes most of the upside has already been priced in, especially in terms of cloud migration demand. 

The data centre operator also faces a question over rising financing costs, with a ~$1 billion shortfall against works-in-progress and uncertain earnings visibility given contract timings and customer concentration.

4. DigiCo (ASX: DGT)

• Rating: Neutral
• Consensus rating: Buy
• Price target: $2.60 (30% upside)

Goldman Sachs' view on another data centre provider DigiCo centres around the role of its SYD1 asset as the "low-latency, high-yielding anchor", with the company's growth dependent on how the FY27-28 ramp up plays out.

It is also looking to move capital out of the US to fund the SYD1 and ADL1 pipeline, which promise higher returns, with an otherwise solid balance sheet. 

5. Macquarie Technology (ASX: MAQ)

• Rating: Neutral 
• Consensus rating: Strong Buy 
• Price target: $58 (30.7% upside)

Like DigiCo and NextDC, Goldman Sachs holds a Neutral rating on data centre and telecom company Macquarie Technology. It says data centres remain the core value driver, with adoption sluggish on its cloud and government services and structural challenges to its telecom business.