The NextDC Ltd (ASX: NXT) share price is trading 1.93% lower today at $13.75.
However, despite edging lower on Monday, NextDC shares are up almost 10% over the past month. That compares with a roughly 18% decline in the S&P/ASX All Technology Index (ASX: XTX) over the same period.
So why is this S&P/ASX 200 Index (ASX: XJO) stock holding up?
Let's take a closer look.
Image source: Getty Images
Why are tech stocks under pressure?
The recent sell-off has been driven by a reset in expectations around artificial intelligence (AI).
Over the past year, many technology stocks rallied strongly on the back of AI optimism. Valuations expanded as investors priced in rapid revenue growth and long-term margin expansion.
In recent weeks, that enthusiasm has cooled. Markets are reassessing how quickly AI spending will convert into earnings, particularly for software and platform businesses still investing heavily.
As a result, higher growth companies have seen valuations compress sharply. That change in sentiment has weighed on the broader technology sector, including ASX-listed tech stocks.
What does NextDC do?
NextDC is not a software company. It develops and operates data centres that provide colocation and connectivity services to enterprises, cloud providers, and government customers.
It owns and runs the physical infrastructure that houses servers and network equipment. These facilities are critical for cloud computing, digital services, and increasingly AI workloads, which require significant computing power and secure environments.
Because of this model, NextDC generates recurring revenue from long-term customer contracts and capacity utilisation rather than from software licence or subscription sales.
Recent developments
Today, the company received development approval for its M4 Melbourne data centre project. This supports its expansion pipeline and reflects continued demand for high-quality data centre capacity in major metropolitan markets.
NextDC has previously highlighted growth in contracted utilisation and a rising forward order book. This provides greater visibility over future revenue as new capacity comes online.
The business continues to invest heavily in new facilities, with capital expenditure directed toward expanding its national footprint and supporting customer growth.
Is it a buy?
NextDC's outperformance relative to the broader tech sector suggests investors view it more as infrastructure than as a high-growth software stock.
Structural demand for data storage, cloud services, and high-performance computing remains solid. Even if sentiment toward software companies stays weak, the need for physical data centre capacity is unlikely to fade.
That said, the business operates in a capital-intensive industry and continues to invest heavily in expansion. It also trades on growth expectations, which can leave the share price exposed during periods of market volatility.
NextDC may appeal to investors seeking exposure to the infrastructure underpinning digital and AI growth.
