Data centres fail as AI pick-and-shovel trade
XLRE•Data centre providers face power, water, chip and community-relations hurdles that can delay projects and let customers cancel contracts. NextDC shares fell 42% after it cut its EBITDA forecast by more than a third, while Firmus Technologies’ planned $5.5 billion IPO was aborted.
1. Demand brings execution risks
Data centre providers were seen as a way to benefit from AI growth regardless of which software developers succeed. But NextDC’s share decline, CoreWeave’s stock-price crash and the aborted $5.5 billion IPO of Firmus Technologies have challenged that view. Developers face semiconductor shortages, delays connecting water and electricity, and local opposition.
2. Delays threaten projects
NextDC misjudged opposition to its M3 site in Melbourne, where delays installing power infrastructure led CEO Craig Scroggie to cut the company’s EBITDA forecast by more than a third, pause projects without customer contracts and consider selling undeveloped sites. UK provider Nscale lost a Microsoft contract after being told power would not be available until 2030.
3. Contracts can be cancelled
Data centre projects are largely financed with debt raised after contracts are signed, but customers may have clauses allowing them to walk away if power or water connections are delayed, chips are unavailable or project completion is more than 12 months late. Providers could be left with unfinished projects, unused land, little or no earnings and substantial debt.
