Own NextDC shares? Here's why the company is spruiking nuclear power

NextDC announced a $1.32 billion capital raising to expand its data centre operations.

| More on:
Data Centre Technology

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

NextDc Ltd (ASX: NXT) shares have gotten plenty of attention this week.

The S&P/ASX 200 Index (ASX: XJO) tech stock entered a trading halt yesterday, after closing on Wednesday at $16.71 a share. Shares are expected to resume trading on Monday.

The trading halt preceded NextDC's announcement of a massive $1.32 billion capital raising.

The funds will be raised via a 1 for 6 entitlement share offer. New shares will be issued for $15.40 apiece. Or almost 8% below where NextDC shares closed on Wednesday.

The $1.32 billion will help NextDC expand its operations to meet the record demand it's experiencing for its data centre services.

CEO Craig Scroggie said, "NextDC continues to see significant growth in demand for its data centre services underpinned by powerful structural tailwinds."

Scroggie said that amid this strong demand growth, "We have decided to bring forward the development and fitout of key assets in Sydney and Melbourne to ensure we are able to meet this growth in demand."

Which brings us to nuclear power.

NextDC shares need power

The rapid rise of artificial intelligence (AI) looks set to match or even dwarf the impact of the internet in the 1990s and 2000s.

But AI doesn't live in a real cloud. Instead, it requires an ever growing amount of computing power, which is increasingly housed in massive data centres.

And in a world intent on weening itself off of fossil fuels while still struggling to provide reliable baseload power with renewables, that poses a potential growth obstacle for NextDC shares.

Which has Scroggie casting his eye on nuclear energy.

"We need power, we need transmission networks, we need green energy, we need more solar, we need more wind and, frankly, we need nuclear," he said (quoted by The Australian Financial Review).

Scroggie added:

We have to find net zero power options that are capable of supporting energy needs when the sun is not shining and the wind is not blowing and batteries [are] not going to cut it.

And the new generation of data centres required to support our AI co-pilots (or soon-to-be pilots) requires a lot more juice.

According to Scroggie, the new data centres NextDC is planning to support AI will use 10 times as much energy as current facilities.

"We're going from general purpose computing to high-performance computing. That will see a generational change both in the scale and the density of computers," he said.

Indeed, having the right ESG credentials on its data centres could offer NextDC shares a significant boost.

As JP Morgan analyst Bob Chen pointed out (quoted by The AFR):

One thing that is also important here is the customers of these data centres, typically your global cloud service providers like Microsoft, Amazon, Google, also have an ESG mandate and are increasingly preferring operators that can source green energy.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Sports fans looking at smart phone representing surging pointsbet share price
Share Gainers

Guess which ASX All Ords share just rocketed 25% on an earnings upgrade

Investors are bidding up the ASX All Ords share following an improved FY 2024 earnings outlook.

Read more »

A man looking at his laptop and thinking.
Technology Shares

ASX 300 fallen star down 62% in a year hits new 52-week low: Time to buy?

Here's my take on Weebit Nano shares today.

Read more »

A man and woman watch their device screens, making investing decisions at home.
Technology Shares

Own Xero shares? Here's what to expect from next week's results

Strong earnings growth is expected from this market darling next week.

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Technology Shares

Brokers name 2 rapidly growing ASX 200 tech stocks to buy

These tech stocks could be quality options for growth investors. Let's see why.

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Technology Shares

What are 3 of the safest ASX 200 tech shares in Australia right now?

Here's how these tech companies stand out in a turbulent market.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Technology Shares

Buy this ASX 200 tech stock now before it's too late: Goldman Sachs

The broker sees potential for some big returns from this tech leader.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

Why is the Life360 share price sinking 9% today?

This high-flying tech stock has handed in its report card. How did it do?

Read more »

Smiling man working on his laptop.
Technology Shares

ASX tech stock up 54% on positive trading update

Integrated Research had some impressive news for its shareholders today.

Read more »