The artificial intelligence and broader digital boom are translating into massive demand for data centres, with broker E&P Capital predicting that some ASX-listed players could post more than 70% gains over the next year.
The broker has released a report on the data centre sector. It says that while 2025 was a big year for the local market, the appetite for new data centres remains strong.
Overall 2025 was a massive year for the local data centre market, with record leasing in Melbourne in particular. This is despite one of the major market customers (Microsoft) being far less active than they have been in the last two years. There is large anticipation of them returning to the leasing market in 2025-26, which likely sets 2026 as another record year building on 2025, which built on 2024.
E&P Capital said it had been bullish on the local data centre market for more than a decade, "and our conviction in this view is as strong as ever".
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Stocks to surge higher
Many of the local data centre companies, such as AirTrunk, are unlisted; however, among the ASX-listed companies covered in the report, E&P Capital is predicting solid share price gains.
Its favoured pick from a valuation perspective is Macquarie Technology Group Ltd (ASX: MAQ), which E&P analysts have assigned a valuation of $112 against the current share price of $64.48.
If that level were attained, it would represent a gain of 73.7%.
The broker is also bullish on NextDC Ltd (ASX: NXT) shares, which are trading around the same levels they were a year ago, after being sold down to as low as $9.40 during the past 12 months.
E&P has a price target of $28.66 on NextDC shares, 64.1% higher than the current price of $17.47.
It is also positive on the $1.5 billion Digico Infrastructure REIT (ASX: DGT), which it has valued at $3.61, 31.7% higher than the current price of $2.74.
Least favoured was Infratil Ltd (ASX: IFT), which E&P analysts have valued at $12.19, 9.9% higher than the current share price of $11.09.
We would regard the conclusions of this report as generally bullish for all companies, with continually large growth rates and emerging deeper supply constraints.
E&P analysts say the Melbourne data centre market is expected to remain particularly hot, and will "take off in a way that will not correlate to the local population, with AWS having set up a machine learning hub in the city in 2025 that has led to an order of magnitude change in their activities".
