'Revolutionary': Wilsons declares NextDC a massive AI winner
The picks and shovels approach to AI investing means the market heavily favours data centre plays like NextDC.
NextDC (ASX: NXT) can profit from soaring demand for data centre capacity to deliver advances linked to artificial intelligence over the next three years, according to Wilsons Advisory.
In a September 1 research note, Wilsons declared NextDC a "mandatory infrastructure holding" as the data centre owner converts a packed forward order book into future billing and profits.
"We remain attracted to NextDC's more than 95% recurring revenue, long-term customer contracts, structural demand drivers, and incremental expansion opportunities at home and abroad," Wilsons told investors.
The Brisbane-headquartered company expects to invest between $1.8 billion and $2 billion in financial 2026, as it races to build capacity across Australia and Asia for an industrial boom in digital services related to AI.
"We remain comfortable with NextDC’s ability to recycle capital and develop new assets to drive medium and long-term growth," Wilsons said.
Still printing losses
For financial 2025, NextDC's loss widened to $60.5 million on revenue up 6% to $427.2 million. Still, Wilsons is urging investors to look past losses tipped to continue into the future to focus on a structural growth story.
"This result has cemented NextDC’s place as a material, scale-player in the global data centre sector. The disclosure of a 3GW development pipeline, split evenly between Melbourne, Sydney and International, suggests NextDX has numerous, sizeable opportunities ahead of it," the broker argued.
Last Thursday, shares surged 17.4% to $16.50 as the market digested management's plans to aggressively expand its data centre empire.
The company's debt facilities now reach $6.4 billion, which is subject to a gearing ratio, which means total debt must not exceed a ratio related to total cash less total assets.
Wilsons expects NextDC's investment spree to translate into a normalised loss of $126.5 million on sales of $486.4 million in financial 2026, and has a 12-month share price target on the stock of $19.98.
According to Dow Jones, of the 17 analysts covering the stock, 11 have a buy rating, with four an overweight rating, and two a hold. The median price target is $19.74 with a high target of $28.66 and low rating of $16.60.
Shares fetched $16.69 on Thursday afternoon.
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Tom covered markets as a Markets Reporter & Commentator at the Australian Financial Review for nearly five years. Prior to that he was the Managing Editor of The Motley Fool Australia leading a team of around 20 investment writers during a five-year period of massive online growth. Before that Tom worked in equities management at the Bank of New York Mellon in London and as a holder of professional investment qualification the Investment Management Certificate is eligible for membership of the CFA Society of the UK.
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Tom covered markets as a Markets Reporter & Commentator at the Australian Financial Review for nearly five years. Prior to that he was the Managing Editor of The Motley Fool Australia leading a team of around 20 investment writers during a...
Tom covered markets as a Markets Reporter & Commentator at the Australian Financial Review for nearly five years. Prior to that he was the Managing Editor of The Motley Fool Australia leading a team of around 20 investment writers during a...
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