1 ASX growth stock that turned $10,000 into $21,000 in less than 2 years

The AI boom continues its ripple effects on the ASX.

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If you are looking for market-beating growth stocks, the ASX is a great starting point. Here, investors can buy small pieces in some of Australia's most promising, innovative, and generally cool businesses.

NextDC Ltd (ASX: NXT) fits the bill nicely, in my opinion. Shares in the technology player have skyrocketed from $8.15 at the close on 31 October 2022 to $17.63 before market open today. That means a $10,000 investment in this ASX growth stock over this time would now be worth approximately $21,600.

Let's explore what's driving this remarkable performance.

What's driving NextDC's impressive growth?

NextDC offers colocation services through its top-tier data centres in Australia and the Asia-Pacific region. These are known as "Tier III and Tier IV" centres.

The surge in demand for cloud computing and artificial intelligence (AI) has boosted the need for data centre capacity, propelling NextDC's growth.

According to a January report from investment bank UBS, its analysts expect AI revenues to grow "15 times, from USD$28 billion in 2022 to USD$420 billion in 2027".

This was a 72% compounding annual growth rate (CAGR), "making AI one of the fastest-growing and largest segments within global tech", UBS said.

The recent results of tech firm NVIDIA Corporation (NASDAQ: NVDA) are a testament to this.

Why is NextDC a top ASX growth stock?

The AI boom is expected to drive even more demand for data centres, positioning NextDC for future growth. And I have two more reasons why this demand makes NextDC a standout ASX growth stock.

One, the big end of town, is getting involved. Private equity giants Blackstone Inc, KKR & Co, and Brookfield Infrastructure Partners are betting large on the AI trend, according to a report in The Australian Financial Review.

Blackstone recently completed a US$10 billion acquisition in the industry. The other two firms conducted deals in US data centres worth $US43 billion between 2021 and 2023, more than five times the prior three years, according to the AFR.

Secondly, brokers are bullish. Morgan Stanley recently rated the stock as overweight with a $20.00 price target, suggesting 11.5% upside potential as I write.

Fellow broker Morgans also has a $19.00 share valuation on the company. It notes that "structural demand for cloud and colocation remains incredibly strong", and expects "significant new customer wins over the next six-to-twelve months".

Should you invest in this ASX growth stock?

NextDC runs data centres, which are in huge demand, and is well-positioned to meet this rising demand.

The company's expansion efforts could also make it a compelling ASX growth stock. In the 12 months to December 2023, the company produced $209.1 million in revenue, up 31% year-on-year. It also grew net tangible assets per share from $3.60/share to $4.25/share.

NextDC has delivered outstanding returns, turning a $10,000 investment into $21,000 in less than two years.

The company's strong market position and rising demand for data centres highlight its potential for continued growth. But remember — past performance is no guarantee of future results.

Motley Fool contributor Zach Bristow 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.

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