How Microsoft’s new Xbox could spur ASX data centre shares

As demand for data continues to grow exponentially, so too does the demand for secure places to store it.

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ASX data centre shares have been receiving more media attention as the growth in global cloud computing shows no signs of easing.

Cloud computing, if you’re unfamiliar, involves storing and processing data outside of your own computer hardware. The cloud, then, simply entails vast server networks located in data centres.

ASX data centre shares have benefited from multiple years of growth in cloud computing. And with the onset of the global pandemic, which drove a huge shift to working, socialising and shopping from home, that growth has only sped up.

According to the Australian Bureau of Statistics (ABS) Characteristics of Australian Business report, released earlier this month, 55% of Australian businesses are now leveraging paid cloud computing. Just 5 years ago, in 2015–2016, that figure was only 31%.

Now one of the world’s biggest companies, Microsoft Corporation (NASDAQ: MSFT), is aiming to take its Xbox game consoles to the clouds.

Gaming in the cloud

As reported by the Australian Financial Review, the prototype Xbox console, “which forms the basis of Microsoft’s ‘xCloud’ strategy, has no hand-held controllers, no Blu-ray drive, and doesn’t plug into your TV.”

The prototype, which operates on something known as a ‘blade’, runs in Microsoft’s own Azure data centres. It’s already been released in the United States and is currently being beta-tested Down Under.

According to Phil Spencer, executive vice-president in charge of Microsoft’s Xbox gaming business:

When I think about reaching the 3 billion people who play video games today, our ability to deliver AAA games to any screen that someone already owns has to be the place we will find the most customers… We might end up with more consoles in data centres than we do in people’s homes.

While Microsoft is deploying the xCloud prototypes in its Azure data centres, the trend highlights the growth potential for leading ASX data centre shares.

2 leading ASX data centre shares

There are 2 ASX data centre related shares listed on the S&P/ASX 200 Index (ASX: XJO).

First up we have Nextdc Ltd (ASX: NXT) with a market cap of $5.4 billion.

The Nextdc share price, up 1% in intraday trading, has gained 31% over the past 12 months. That compares to a 29% gain posted by the ASX 200. Year-to-date Nextdc shares have come under pressure, down 3%.

Next up is Megaport Ltd (ASX: MP1), a software-defined network service provider which enables enterprise customers to connect between data centres, with a market cap of $2.5 billion.

The Megaport share price is up 1% in afternoon trade and has gained 17% over the past 12 months. Megaport shares are up 15% so far in 2021.

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Bernd Struben has no position in any of the stocks mentioned. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended MEGAPORT FPO and Microsoft. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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