Are these the best ASX data centre stocks? [2024]

Data centre capacity in Australia is forecast to more than double from 1,350 megawatts (MW) in 2024 to 3,100 MW by 2030. Additional investment in Australia’s data centre capacity is forecast to exceed $26b over this period.

Rising demand has lifted shares in global giant Equinix ($EQIX) and attracted a $24b offer for Airtrunk by Blackstone and Canada Pension Plan Investment Board. Australian investors will gain an additional way to gain exposure to data centres when DigiCo Infrastructure REIT ($DGT) lists on the ASX on 16 December. With a market cap of $2.7b, it will be Australia’s largest IPO in 2024.

Here are eight ASX data centre stocks investing in this crucial infrastructure.

Watch these Australian data centre companies on the ASX

Data as of 29 November 2024. Source: Stake, ASX. *DGT's IPO was priced at $5 a share and will list on 16 December 2024.

*The list of shares mentioned is ranked by market capitalisation. When deciding what assets to feature, we analyse the financials, recent news and announcements, the state of the industry and the company's projects, and whether or not they are actively traded on Stake.

Explore the top ASX data centre stocks

1. Goodman Group ($GMG)

• Market capitalisation: $73.12b
• Stock price (as of 29/11/2024): $37.91
• Our customers watching and trading $GMG (as of 2 December 2024): 3,216 watching and 3,551 orders executed

Goodman Group ($GMG) is one of Australia's largest industrial property groups which develops, and manages assets such as logistics facilities, warehouses and business parks. Goodman is investing heavily in data centres. It has five gigawatts of capacity, most of which is yet to be developed. It has one gigawatt of completed projects and work-in-progress (WIP). 

The company expects ‘substantial’ new starts before the end of 2025 and says data centres will be a ‘major’ area of growth in FY25. Current assets in its portfolio are being reviewed to assess whether they may generate higher returns if converted to data centres. Goodman says data centres will represent an increasing proportion of work-in-progress and of its total portfolio. Data centres accounted for 40% of WIP at June 30.

2. Infratil Limited ($IFT)

• Market capitalisation: $11.17b
• Stock price (as of 29/11/2024): $11.63
• Our customers watching and trading $IFT (as of 2 December 2024): 525 watching and 864 orders executed

Infratil is a New Zealand-based infrastructure investor with a portfolio that spans airports, healthcare, renewable energy and digital infrastructure. Infratil owns a 48% stake in Canberra-based CDC, the largest privately owned and operated data centre business across Australia and New Zealand. CDC operates 302 megawatts of capacity across twenty facilities in eight campus locations. 

An additional 388MW of capacity is under construction across Auckland, Melbourne, Sydney and Canberra. Strong customer demand increased the forecast build capacity by over 1,000MW by 2034 in the six months to September 30. CDC’s EBITDAF (EBITDA and incentive fees) for the six months to September 30 was $159 million, up 29% year-on-year. This was driven by the commissioning of the first Melbourne data centre and higher utilisation across existing centres.

3. NEXTDC Limited ($NXT)

• Market capitalisation: $10.39b
• Stock price (as of 29/11/2024): $16.27
• Our customers watching and trading $NXT (as of 2 December 2024): 2,558 watching and 3,110 orders executed

NextDC ($NXT) is Australia's leading independent data centre operator of premium colocation data centres. The company delivered record annual sales of 50.5 megawatts in FY24, with contracted utilisation increasing 41% to 172.6MW. There was 32MW of built capacity added across Australia in FY24, with an additional 72MW of fit out in progress globally. It has a record forward order book of 86.6MW across FY25 to FY29, which will drive revenues and earnings

NextDC raised $2b this year to fund expansion in Australia and globally. It raised $1.32b in April and May, including $937m from an institutional entitlement offer at $15.40 a share. NextDC raised $678m across September and October, including $550m from an institutional placement at $17.15 a share. Some of those funds were used to fund the $353m acquisition of a new data centre site known as S7 in October. The new centre will have 550MW of capacity.

4. Spark NZ Limited ($SPK)

• Market capitalisation: $4.94b
• Stock price (as of 29/11/2024): $2.65
• Our customers watching and trading $SPK (as of 2 December 2024): 398 watching and 565 orders executed

Spark NZ is New Zealand’s largest telecommunication provider and is expanding its presence in data centres. It holds about 25% of the existing capacity in the New Zealand market. Its 118MW development pipeline will require around NZ$1b of capex over the next five to even years. Most of its built and development capacity is in Auckland. Spark NZ is investing between NZ$70m and NZ$90m to fund expansion at three Auckland sites in FY25. 

Spark NZ downgraded its FY25 earnings guidance in October due to weak consumer spending and business investment. However, management identified data centres as an important driver of shareholder value over the long term. It is exploring capital partnerships to help fund its strategy rather than rely on free cash flow.

5. DigiCo Infrastructure REIT ($DGT)

• Market capitalisation: $2.74b
• Stock price (as of 29/11/2024): $5.00*

DigiCo Infrastructure REIT will offer investors another way to gain exposure to data centres when it lists in the ASX on 16 December. DigiCo REIT’s Aggregate Portfolio consists of 13 Properties across key Australian and North American markets with an acquisition price of $3.95b, contracted IT capacity of 67MW and contracted utilisation of 88%. The REIT intends to undertake brownfield and greenfield development opportunities with an initial 161MW of future expansion IT capacity. 

DigiCo REIT is selling 399.1 million securities to raise $1.99b through its IPO. The offer price is $5 per Security*. There will be 549m shares on issue, giving DigiCo Infrastructure REIT a market cap of $2.75b at its offer price.

6. Macquarie Technology Group Limited ($MAQ)

• Market capitalisation: $2.24b
• Stock price (as of 29/11/2024): $87.97
• Our customers watching and trading $MAQ (as of 2 December 2024): 962 watching and 663 orders executed

Macquarie Telecom Group ($MAQ) has built a portfolio of sovereign Australian data centres over the past two decades, supporting the mission-critical IT workloads of defence, financial services and hyper-scale customers. Its data centres support 42% of the Australian government and two out of three hyperscalers, with capacity being extended to 63MW. All of its data centres are certified as strategic by the Australian government. 

Data centres accounted for 11% of revenue at 32% of EBITDA at June 30. Data centre revenue increased 8.7% to $70m in FY24. Macquarie Technology raised $100m at $72.50 in April to fund the $190m acquisition of the Intellicentre 2 and Intellicentre 3 East land and buildings at its existing Macquarie Park Data Centre Campus from Keppel DC REIT.

7. Megaport Limited ($MP1)

• Market capitalisation: $1.19b
• Stock price (as of 29/11/2024): $7.89
• Our customers watching and trading $MP1 (as of 2 December 2024): 2,089 watching and 6,351 orders executed

Megaport is a global leader in Network as a Service (NaaS), providing connectivity between different data centers, cloud providers and end-users. It offers data centre to cloud connectivity and data centre to data centre connectivity. Megaport's primary revenue source is derived from monthly recurring subscription fees for its NaaS platform, along with usage-based charges for data transfer and additional services. 

Megaport has over 900 enabled locations and a presence in 26 countries. It serves more than 2,600 clients and works with more than 400 service providers. Megaport recently affirmed FY25 revenue guidance of between $214m and $222m.

8. 5G Networks ($5GN)

• Market capitalisation: $47.64m
• Stock price (as of 29/11/2024): $0.15
• Our customers watching and trading $5GN (as of 2 December 2024): 54 watching and 73 orders executed

5GN has more than 2,500 corporate clients with services spanning cloud, data networks, data centres, managed IT services and digital marketing. It has a combined rack capacity of over 1,200 racks through five owned and operated data centres across Melbourne, Sydney, Brisbane and Adelaide. The co-location centres offer high-speed connectivity options, including dedicated connections, public and private internet access, and cross-connects to major carriers and cloud service providers.

How to invest in data centres through ASX shares

You’ll need to follow these steps if you are wishing to invest in the top data centre companies in Australia:

1. Find a stock investing platform

To buy data centre stocks on the ASX, you'll need to sign up to an investing platform with access to the Aussie stock market. There are several share investing platforms available, of which Stake is one.

2. Fund your account

Open an account by completing an application with your personal and financial details. Fund your account with a bank transfer, debit card or even Apple/Google Pay.

3. Search for the company or ticker symbol

Find the company name or ticker symbol. It is advised to conduct your own research to ensure you are purchasing the right investment product for your individual circumstances.

4. Set a market or limit order and buy the shares

Buy on any trading day using a market order, or a limit order to delay your purchase of the asset until it reaches your desired price. You may wish to look into dollar cost averaging to spread out your risk, which smooths out buying at consistent intervals.

5. Monitor your investment

Once you own the stock, you should monitor its performance. Check your portfolio regularly to ensure your investment is aligning with your financial goals.

Are data centre shares a good investment?

The data centre industry is experiencing unprecedented growth, fueled by the digital transformation of businesses, the rise of cloud computing, and the proliferation of data-intensive technologies like artificial intelligence. This surge in demand for data storage and processing has made data centre companies an attractive prospect for investors seeking exposure to this sector.

Just remember, like any investment, the potential for rewards also carries inherent risks. A thorough understanding of the market and individual companies is crucial for making informed decisions.

What are the risks of investing in data centre companies?

The data centre industry can be an interesting way to diversify for those willing to carefully research and choose companies with solid fundamentals. The choice to invest in data centre shares should align with your individual risk tolerance, investment goals, and time horizon. Consider the potential risks below or consult with a financial advisor before making any investment decisions.

• Capital intensive: Building and operating data centres requires substantial capital investment, which can lead to high debt levels for some companies.
• Competition: The data centre space is already becoming competitive, with both established players and new entrants vying for market share.
• Technological disruption: The rapid pace of technological change can render existing data centre infrastructure obsolete, requiring ongoing investment in upgrades and innovation.
• Regulatory changes: Government regulations related to data privacy, security, and energy consumption can impact the operations and profitability of data centre companies.

What data centre ETFs can I invest in?

While there is yet to be any data centre ETFs available on the ASX, jumping across to Wall St there are a few options if you want to gain exposure to this thematic and diversify your portfolio.

• Global X Data Center and Digital Infrastructure ETF ($DTCR): This ETF seeks to invest in companies operating data centres and other digital infrastructure supporting communication networks, aiming to provide investment results that correspond generally to the price and yield performance of the Solactive Data Center REITs & Digital Infrastructure Index, before fees and expenses.
• iShares U.S. Digital Infrastructure and Real Estate ETF ($IDGT): This ETF targets exposure to U.S.-listed companies involved in infrastructure for the storage, processing, transmission and/or access of digital data and services.

Compare the performance of DTCR vs IDGT using our stock and ETF comparison tool.

This article was edited by Robert Guy - Senior Markets Writer at Stake.

This does not constitute financial product advice nor a recommendation to invest in the securities listed. Past performance is not a reliable indicator of future performance. When you invest, your capital is at risk. You should consider your own investment objectives, financial situation, particular needs. The value of your investments can go down as well as up and you may receive back less than your original investment. As always, do your own research and consider seeking appropriate financial advice before investing.

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