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The AI Data Centre boom has collided with something software cannot fix: getting the electricity connected.
NEXTDC shares plunged more than 40 per cent after delays in upgrading electricity at its Melbourne facility forced it to cut its earnings forecast. Firmus scrapped its proposed IPO, while South Korean operator Elice fell 32 per cent on debut, before recovering the losses the following day.
These setbacks raise a question: is demand disappointing, or is the industry struggling to deliver enough capacity?
Australia has been here before. During the mining boom, ships queued outside Newcastle and Dalrymple Bay because export infrastructure struggled to keep pace. Customers wanted the resources, but getting them to market was another matter.
Those bottlenecks did not end the boom. Investment expanded infrastructure, and by 2010 the Reserve Bank reported higher iron ore and coal export capacity. The comparison offers a reason to remain constructive on data centres. A delayed electricity connection does not, by itself, mean demand has disappeared.
The International Energy Agency expects global data-centre electricity consumption to nearly double, from 485 terawatt-hours in 2025 to 950 by 2030. Australian research forecasts consumption will nearly triple, from 5.2 terawatt-hours in FY26 to 15.8 by FY30.
But forecasts alone cannot pay the bills. Construction and financing costs can accumulate while revenue waits. The RBA has warned that debt-funded AI projects could struggle if demand disappoints or adoption takes longer than expected.
For NEXTDC, Macquarie Technology Group and Goodman Group, investors should therefore watch customer commitments and funding alongside construction milestones. Customers staying committed through delays would support the argument that revenue has been postponed. Cancellations or reduced requirements would suggest something more troubling.
I think infrastructure constraints are insufficient evidence to declare the boom is over. The mining experience shows an industry can build through bottlenecks when demand persists, although that does not guarantee every project or share price will recover.
Ships waiting offshore helped explain why Australia needed more export capacity. For data centres, the equivalent test is whether customers will still be waiting when the power finally arrives.
Best and worst sectors
Communication Services is the best-performing sector so far this week, rising 2.86 per cent on the back of strong gains in Telstra and TPG, with investors looking for some buy-the-dip type opportunities.
Industrials gained 2.56 per cent, driven by Cleanaway’s takeover offer, which sparked a roughly 20 per cent jump, which helped lift the sector.
Financials rounded out the top 3, up 1.78 per cent, as the major banks continued to rebound, while takeover interest in Challenger provided support.
At the other end of the market, Information Technology is the worst sector so far this week. It fell more than 4 per cent as NEXTDC’s earnings downgrade compounded an ongoing global sell-off in technology and AI stocks.
Materials was the second-worst sector, dropping 4 per cent as falling gold stocks and renewed weakness in major miners weighed on the sector.
Energy rounded out the worst performers this week, falling 1.09 per cent as oil pulled back and immediate Middle East escalation fears eased, pressuring energy shares later in the week.
Best and worst stocks
Cleanaway Waste Management led the ASX Top 100 this week, climbing more than 21 per cent after agreeing to an EQT takeover valuing the business at approximately $9.3 billion, including debt.
Challenger Limited followed, rising over 18 per cent after Daiichi Life proposed an $11.80-a-share takeover, roughly 20 per cent above its previous closing price.
Pro Medicus rounded out the leading performers, gaining over 10 per cent after securing two seven-year US contracts worth a combined $67 million with Billings Clinic–Logan Health and Virtua Health.
At the other end, NEXTDC Limited was the weakest performer, falling more than 37 per cent after delayed electricity connections at its Melbourne M3 facility forced an earnings forecast downgrade.
Telix Pharmaceuticals followed, falling over 13 per cent after its quarterly update showed a modest sequential revenue decline, disappointing investors despite a positive full-year outlook.
Regis Resources Limited rounded out the worst performers, falling more than 10 per cent as rain-disrupted production and higher unit costs overshadowed strong cash generation in its September-quarter results.
All Ordinaries Index update
The All Ordinaries Index has barely moved this week, slipping just 0.26 per cent so far as it holds above 8,830. For the past month, the index has traded in a tight range, hinting at a breakout one week and a fall the next. This week’s action tilted the balance slightly towards further weakness, although recent trading has shown how quickly that picture can change.
However, one potentially encouraging difference stands out: this is the first week in that range that the index hasn’t retested 8,800. If the market rises from here and breaks above 9,000 points, it suggests buyers are becoming more confident and stepping in earlier, rather than waiting for another return to the lows.
Seasonality also makes the next two months worth watching. Materials typically strengthen through November and December, while Financials tend to soften in November before regaining strength in December. Given their substantial influence on the Australian market, these sectors could determine whether the index finally escapes its range.
If Materials strength is offset by Financials weakness next month, the market could remain stuck a little longer. December may offer a better opportunity for a Santa rally if both sectors begin moving in the same direction.
Good luck and good trading.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at ww.wealthwithin.com.au.
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