Data centres fail as AI pick-and-shovel trade

Data centre providers were seen as a way to benefit from AI demand regardless of which software developers succeeded. But semiconductor shortages, slow utility connections and local opposition are creating delays and challenging that investment thesis.

NextDC shares fell 42% after the Australian operator cut its underlying EBITDA forecast for the financial year ending in June by more than a third, to A$245 million to A$265 million. CEO Craig Scroggie put projects without customer contracts on hold, began a review of capital expenditure and said the company was open to selling development sites not needed in the near term. The company said it had A$8.7 billion of liquidity at the end of September.

Nscale lost a contract with Microsoft after being told power would not be available until 2030. Data centre projects are often debt-financed after a customer contract is signed, but contract clauses can let customers cancel if power, water or chips are unavailable or if completion is more than 12 months late. Providers could be left with unfinished projects, unused land and debt.