Data centres fail as AI pick-and-shovel trade

NEXTDC

Today 03:17

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.
By Antony Currie
MELBOURNE, Oct 23 (Reuters Breakingviews) - NextDC shares fell 42% after community backlash delayed power upgrades at one site. Investors are wising up to the trade-offs of massive debt-financed spending, slow-moving utilities, chip shortages and impatient hyperscaler clients like OpenAI with ironclad get-out clauses.
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CONTEXT NEWS 
Shares in NextDC closed down 42% on October 21 after the Australian data centre builder and operator cut its underlying EBITDA forecast for the financial year to the end of June by more than a third.
The company now expects EBITDA of A$245 million to A$265 million ($172 million to $186 million) for the period. 
CEO Craig Scroggie also said he is putting on hold all projects not already backed by customer contracts, has started a "detailed review" of the company's capital expenditure programme and is open to selling development sites that "are not required in the near term".
The move came after Jemena Electricity Networks informed NextDC that it has suspended some of the work to increase power supply to its M3 data centre in Melbourne following "community and stakeholder opposition". Last month local residents used their vehicles and other methods to prevent Jemena from installing concrete electricity poles of up to 22 metres in height that are needed to carry the 66,000-volt power lines the data centre will require.
Scroggie also noted that the company had some A$8.7 billion of liquidity at the end of September.
Meanwhile, on October 20, after local opposition, Amazon abandoned plans to build four data centres on a site it had bought from George Washington University in Virginia in the US. The company also agreed to donate $5 million to the county's housing trust fund.

(Editing by Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on CURRIE/antony.currie@thomsonreuters.com))