NextDC Ltd (ASX: NXT), Westpac Banking Corp (ASX: WBC), and Wesfarmers Ltd (ASX: WES) shares are popular with investors.
But would I buy any of these shares at present?
I see a strong long-term opportunity in one, a share I would avoid for now, and a high-quality company that I would approach more carefully at its current price.
Here's my verdict on all three.
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NextDC shares
I would buy NextDC shares for long-term exposure to artificial intelligence (AI).
AI requires far more than advanced chips and software. It also depends on enormous amounts of secure data centre capacity, electricity, cooling, and connectivity. NextDC is building the infrastructure that allows hyperscalers, cloud platforms, and AI companies to run increasingly demanding workloads.
Demand is already turning into major customer commitments. NextDC's contracted utilisation reached 667 megawatts in April after increasing by 60%, while its forward order book grew by 83% to 544 megawatts. The company expects its contracted capacity to generate more than $1 billion of EBITDA over time as new data halls are completed and customers begin paying for them.
I think this is an important distinction. NextDC is investing heavily because customers have already committed to taking capacity, giving the company greater visibility over future revenue.
The scale of the expansion still creates execution risk. NextDC must fund, build, and energise its facilities while controlling construction costs. Power availability and planning approvals could also slow development.
Even so, I believe the AI infrastructure opportunity is large enough to justify buying NextDC shares with a long investment timeframe.
Westpac shares
I would pass on Westpac shares for now.
My main concern is the bank's exposure to Australian housing and retail banking. Westpac had an Australian mortgage portfolio of approximately $536 billion at the end of March, making home lending a major influence on its earnings and risk profile.
That leaves the bank exposed to changes in housing activity, mortgage competition, interest rates, and the financial health of Australian households. A weaker housing market could slow credit growth, while pressure on borrowers may eventually lead to higher arrears and bad debts.
Westpac's current mortgage credit quality remains sound, with 90-day delinquencies and impaired mortgages still at relatively low levels. However, I am more cautious about where housing conditions could head from here and how much growth Westpac can generate from such a mature market.
For me, the concentration in retail banking makes the risk and reward less attractive than the opportunities available elsewhere on the ASX.
Wesfarmers shares
My view on Wesfarmers sits somewhere between a hold and a buy.
I continue to love the underlying business. Bunnings and Kmart are exceptional retailers with strong brands, low-price positions, and impressive returns on capital. Wesfarmers is also building new growth avenues through Priceline, OnePass, customer data, retail media, and the Mt Holland lithium project.
OnePass is particularly interesting because it can encourage customers to spend across several Wesfarmers businesses. Management is also using artificial intelligence to improve merchandising, marketing, supply chains, and productivity throughout the group.
The difficulty is the entry price. Wesfarmers shares are trading around $91.28 after a strong run, which translates to a forward PE ratio of 33x estimated FY27 earnings. I think that suggests investors already expect plenty from the company.
I would be comfortable holding Wesfarmers and perhaps buying a modest position today. A cheaper share price would make me far more enthusiastic about adding heavily.
Foolish takeaway
NextDC is my strongest buy of the three because AI demand is creating a substantial pipeline of contracted growth.
I would avoid Westpac for now and treat Wesfarmers as a hold to moderate buy. I remain very positive about Wesfarmers as a business, although patience could provide a better opportunity to own more of it.
