S&P/ASX 200 Index (ASX: XJO) tech stock NextDC Ltd (ASX: NXT) has had a great run over the past year.
On Thursday, shares in the data centre operator and developer closed 2.44% higher, trading for $17.64 apiece.
That sees the NextDC share price up 46.5% in 12 months. Or more than three times the 18.0% returns delivered by the ASX 200 over this same time.
Despite the strong run higher this last year, I believe the NextDC share price can continue to outpace the benchmark index over the next several years.
Much of that bullishness stems from the rapid growth of artificial intelligence (AI).
ASX 200 tech stock eyeing booming market growth
We may say that the world's growing data needs increasingly reside in the cloud.
But in reality, this cloud is made up of an ever-growing number of data centres packed with high-tech, power-hungry servers.
The AI revolution is seeing the demand for data centres, particularly newer AI-enabled facilities, explode. That, in turn, has seen investors pile into this ASX 200 tech stock.
Fortunately, in good news for NextDC, it looks like this rally could have some real legs yet.
According to CBRE's October 2024 Australia Data Centres report, the local data centre market is poised to almost double to some $40 billion over the next five years.
CBRE expects Australia's AI revenue to double to $5.5 billion by 2029. The global investment company forecasts that half of Aussie companies will employ AI in some form within five years.
And CBRE data centre research head Sass Jalili believes these figures may well underestimate the actual growth we're set to see.
According to Jalili (quoted by The Australian Financial Review), "I would say the forecasts on data centre growth is on the conservative side."
She added, "I wouldn't be surprised if we actually see it go above what's forecasted over the next five years, just given the rate of use for AI."
Indeed, the rapid pace of AI adoption could see data centre demand outpace new supply. I believe this should help this ASX 200 tech stock continue to deliver market-beating gains.
Jalili noted:
Adoption cycles have only continued to shorten, with Twitter taking two years to reach one million followers, while the newer ChatGPT only needed five days to get that volume of user base.
NextDC raising billions to expand
With an eye on the fast-growing demand for AI-enabled data centres, NextDC has been on a capital-raising spree this year.
In April, the ASX 200 tech stock raked in around $1.3 billion via an institutional and retail capital raising.
"NextDC continues to see significant growth in demand for its data centre services underpinned by powerful structural tailwinds," CEO Craig Scroggie said at the time.
In September, the company launched another capital raising to bring in an additional $750 million.
Commenting on the latest round of fundraising for the ASX 200 tech stock, Scroggie said:
While the company is already well placed from a liquidity perspective to continue to accelerate its development activities, it is becoming clear that opportunities for value accretive investment in the near term will continue to grow in accordance with our record pipeline and strong growth in the demand for cloud and AI services.
