Bullish about data centre growth? I'd try these 3 ASX 200 shares

These stocks are benefiting from strong technological demand.

| More on:
Three people gather around a large computer screen where they are looking at something that is captivating their interest with a graphic image of data and digital technology material superimposed to the right hand third of the image.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The world is becoming increasingly technological in numerous ways. One of the most important elements of this change and growth is data centres. There are a few S&P/ASX 200 Index (ASX: XJO) shares that are tapping into this growth sector.

Cisco describes a data centre as the following:

At its simplest, a data centre is a physical facility that organisations use to house their critical applications and data. A data centre's design is based on a network of computing and storage resources that enable the delivery of shared applications and data.

The key components of a data centre design include routers, switches, firewalls, storage systems, servers, and application-delivery controllers.

In other words, it's an important physical element of the global digital infrastructure.

Here are three ASX 200 shares trying to take advantage of this growth tailwind.

NextDC Ltd (ASX: NXT)

This ASX 200 share describes itself as Asia's most innovative data centre as a service provider. It says it's "building the infrastructure platform for the digital economy, delivering the critical power, security and connectivity for global cloud computing providers, enterprise and government".

It has several data centres already operational across Australia's biggest cities.

Interestingly, the company now looks at data centre growth in different locations, including Auckland, Kuala Lumpur, Tokyo, Singapore and Port Hedland.

NextDC said contracted utilisation in FY23 was up 39.2MW (47%) to 122.2MW since 30 June 2022. In FY23, the company grew total revenue by 25% to $362.4 million.

This business may give the most obvious and concentrated access to the data centre growth tailwind on the ASX.

Megaport Ltd (ASX: MP1)

This ASX 200 share describes itself as a leading provider of network-as-a-service solutions. Its global software-defined network (SDN) helps businesses "rapidly connect their network to services via an easy-to-use portal" or its open API. The company offers "agile networking capabilities" that "reduce operating costs and increase speed to market" compared to traditional networking solutions.

In the three months to September 2023, being the first quarter of FY24, Megaport generated total revenue of $40.5 (up 5% quarter on quarter), and it made $15 million of earnings before interest, tax, depreciation and amortisation (EBITDA) (up $14 million year over year).

The company is growing its core offering at a reasonable rate and recently launched Megaport Reach as a "rapid, cost-effective way for data centre operators to deploy to new locations, bringing the cloud to their facilities in under 90 days."

Goodman Group (ASX: GMG)

Goodman is best known for owning, operating, and building industrial properties. But, it has a plan to build a growing portfolio of data centres.

The ASX 200 share's 3.7GW power bank includes delivered projects, secured and potential data centre projects.

Data centres under construction currently represent approximately 25% of work in progress (WIP).

Goodman's pipeline is geographically spread across 12 cities and is in locations that are large, consumer-focused markets with high barriers to entry.

It's working with customers to assess various project delivery and leasing models that suit their requirements. The existing power bank is expected to develop over the next seven to ten years.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Cisco Systems, Goodman Group, and Megaport. The Motley Fool Australia has recommended Goodman Group and Megaport. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A woman ponders a question as she puts money into a piggy bank with a model plane and suitcase nearby.
Share Market News

If I invest $10,000 in Qantas shares, how much passive income will I receive in 2024?

Here's what analysts are predicting from the airline operator.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

These ASX 200 shares could rise 20% to 50%

Big returns could be on the cards according to analysts.

Read more »

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Value Investing

Looking for ASX value shares? Here's 1 I'd buy and 1 I'd avoid!

It's not an easy exercise to identify which stocks are undervalued and which ones are simply terrible. Here's an example…

Read more »

A young girl looks up and balances a pencil on her nose, while thinking about a decision she has to make.
Opinions

Will I be buying Zip shares now the company has turned a profit?

Is now the right time to buy this BNPL stock -- or not?

Read more »

a man with hands in pockets and a serious look on his face stares out of an office window onto a landscape of highrise office buildings in an urban landscape
Opinions

1 ASX dividend stock down 55% to buy right now

Here's why I think this beaten-up stock could be an opportunity.

Read more »

Three analysts look at tech options on a wall screen
Share Market News

Here's how the ASX 200 market sectors stacked up this week

ASX tech shares are on fire, leading the 11 market sectors for a third consecutive week.

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Market News

Here are the top 10 ASX 200 shares today

The ASX 200 clocked a few new all-time highs this Friday.

Read more »

A young couple stands next to a real estate agent in an empty apartment they are inspecting
Share Market News

How ASX shares vs. property performed in February

We reveal the property price growth for each city and regional market and the top 5 risers of the ASX…

Read more »