AI Shift Drives Surge in Data Centre Demand

As companies explore AI agents to handle tasks traditionally done by people, infrastructure firms like NextDC see a surge in demand. However, the race to automate could raise legal and regulatory questions.

NextDC, the $8.75 billion ASX-listed data centre operator, reports more than a 50% jump in customer orders this year due to heightened interest in generative AI systems. The company lifted its capital expenditure forecast by $100 million, betting on further AI-related growth. One tech giant cited in the story now requires employees to prove a task can't be done by artificial intelligence before hiring.

The rise of AI agents is changing how businesses think about efficiency. Rather than outsourcing overseas for lower wages, a common cost-reduction strategy of the last few decades, some firms now lean on intelligent software solutions powered by massive computing infrastructures. And those AI models need to be run locally in many industries to stay compliant with privacy and data laws, pushing up regional data centre demand.

NextDC’s share price climbed over 8% to $13.71 following the announcement. Meanwhile, projected global spending on AI-ready data centres varies widely. McKinsey pegs the need at $6.7 trillion, while another major semiconductor firm suggests the figure could be closer to $2 trillion over five years. NextDC says the true number will likely fall in between.

Some in the tech sector remain concerned about how certain AI labs are securing advanced chips, citing transparency issues. One such lab claimed to have trained a next-gen AI model for just $9 million, far below the industry norm, which usually spans from $100 million up to $1 billion. However, analysts believe this won’t hurt data centre operators, as the broader industry still depends on large-scale computing infrastructure.

Source: Australian Financial Review, Morgan Lewis, McKinsey & Company, Goldman Sachs.