NextDC shares crash 40% as community concerns and rising costs shake AI data centre faith

Delays at Melbourne M3 site and broader investor jitters signal a shift in the data centre investment story

By LineZotpaper

Published22 October 2026

Read Time3 min

Sources2 outlets

Shares in Australian data centre builder NextDC collapsed by 40 percent on Wednesday after the company warned that delays at its flagship Melbourne site would cause it to miss revenue forecasts, a development that has deepened investor anxiety about the viability of the AI infrastructure boom. The delays stem from local community opposition to 22-metre power poles that are crucial to the facility's operation, with electricity distributor Jemena pausing construction after councils raised concerns about the impact on residential neighbourhoods.

The dramatic sell-off in NextDC reflects a broader loss of faith in the economics of data centre investing, according to a new analysis from the University of Melbourne. For two decades, data centres were seen as safe, lucrative real estate investments, the essential plumbing of the internet. But the rise of AI, with its insatiable demand for computing power, has launched a race to build ever larger facilities, and that race is now hitting roadblocks.

NextDC is not alone in facing headwinds. Data centre company Firmus abruptly cancelled its multibillion-dollar listing on the Australian stock exchange due to a lack of investor demand. London-based Nscale is struggling to attract buyers for a Wall Street listing. Shares in CoreWeave, which operates what it claims is the world's most powerful AI supercomputer, dropped 15 percent in a single day last week on financial strength concerns.

The analysis warns that the jitters reflect a harsh reality: while the hype around AI remains strong, the business models are coming under increasing scrutiny. Hundreds of billions of dollars have been spent globally on training models and building the data centres to house AI infrastructure, with the investment pipeline expected to reach some US$10 trillion (A$14.25 trillion) by 2032. Much of this spending has been funded by borrowing, and rising interest rates are now complicating the picture, making other investments more attractive.

A particular concern is the short lifespan of AI chips. Traditional data centre hardware could operate for decades with minimal maintenance, but AI chips need replacement every few years, driving a treadmill of multibillion-dollar upgrade expenses for power delivery and cooling. Even if AI revenues stabilise, there is no guarantee that data centre companies will be able to access the chips they need. Amazon recently admitted it is hoarding billions of AI chips without the capacity to install them, a sign of supply-chain anxiety.

Beyond the balance sheet, the analysis points to a loss of social licence for data centres amid local protests. Community concerns include persistent noise from energy transmission, visual impacts, localised heating, and environmental effects. Forecasts suggest that New South Wales data centres could consume up to 25 percent of Sydney's daily water demand within a decade. In Victoria, transmission company AusNet is reviewing requests from data centres for more than 10 gigawatts of connections, which could exceed the state's entire supply capacity.

The analysis suggests that to shore up investor confidence, AI investments should not just focus on building better models, but also models that are more efficient in terms of costs, energy demands and spatial requirements. If data centres can be designed to support the electricity grid by adding renewable capacity, then communities may begin to feel the benefits.

Analysis

Why This Matters

The 40% crash in NextDC shares signals that investors are beginning to doubt the long-term profitability of AI data centre investments, a sector that has attracted trillions in capital commitments.
Community opposition and regulatory pushback in Australia could slow or halt major projects, affecting electricity prices, water use, and local amenity for residents in Melbourne's west and beyond.
The broader trend may force a recalibration of AI infrastructure spending, potentially slowing the pace of AI development if capital becomes harder to access.

Background

Data centres have been a staple of technology infrastructure for decades, providing the physical space for servers that power the internet. The AI boom has dramatically increased demand for these facilities, because training and running large AI models requires enormous amounts of computing power and electricity. Developers have responded with a wave of new construction, but the economics are now under strain: rising interest rates make borrowing more expensive, AI chips become obsolete quickly, and local communities are increasingly resistant to hosting large power-hungry facilities.

Key Perspectives

Investors: They face a conundrum. Huge capital is needed to build and upgrade data centres, but returns may take years to materialise. The analysis notes that companies like OpenAI and Anthropic would need to grow revenues by 80% a year for six years to meet expectations, yet consumer and corporate spending on paid AI models is slowing. Investors are starting to question the risk-reward ratio.

Local communities: Residents near proposed data centre sites have raised concerns about noise, visual blight, and strain on local utilities. In Melbourne's Footscray, councils objected to giant power poles, leading to a construction pause. Broader worries include water shortages and higher electricity bills if data centres consume a large share of supply.

Data centre companies: They argue that AI-driven demand makes their infrastructure essential, and that they are responding to a genuine technological shift. However, the analysis suggests they are trapped in an expensive upgrade cycle and face growing difficulty securing planning approvals and social licence.

What to Watch

NextDC's next revenue update and whether it can resolve the Melbourne site delays to get back on track.
The outcome of AusNet's review of data centre connection requests in Victoria and any state government response to power and water concerns.
Whether other listed data centre developers follow NextDC and CoreWeave with profit warnings, and how the corporate bond market treats their debt issuances.

Sources

Shares in this data centre company are down 40% as investors lose faith in the AI story · Business + Economy – The Conversation
Shares in this data centre company are down 40% as investors lose faith in the AI story · The Conversation – Articles (AU)

Checked

12 claims in this story checked against 1 source: 9 supported.

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SupportedNextDC shares fell 40% amid concerns about community impacts, rising costs and investor confidence in data centres.Business + Economy – The Conversation: “On Wednesday, shares in NextDC, one of Australia’s largest data centre builders, collapsed by 40% after it said delays at its flagship Melbourne site meant its revenue forecasts would fall short of forecasts.”
SupportedDelays at NextDC’s Melbourne M3 site and broader investor jitters signal a shift in the data centre investment story.Business + Economy – The Conversation: “These factors mean the era of data centres being a safe stock market investment are over. And if investors become unwilling to fund these risks blindly, and communities become resistant to hosting these centres, this month’s stock market jitters may turn into a steeper market sell-off.”
SupportedNextDC said delays at its flagship Melbourne site meant its revenue forecasts would fall short.Business + Economy – The Conversation: “On Wednesday, shares in NextDC, one of Australia’s largest data centre builders, collapsed by 40% after it said delays at its flagship Melbourne site meant its revenue forecasts would fall short of forecasts.”
Partly supportedThe delays stemmed from local opposition to 22-metre power poles crucial to the facility’s operation.Business + Economy – The Conversation: “These delays have come about after the local community raised significant concerns about the impact of NextDC’s M3 data centre expansion. Electricity distributor Jemena paused the construction of the giant concrete power poles that had been snaking their way along Footscray streets, after local councils raised concerns about the impact on residential neighbourhoods. These 22-metre power poles are crucial to NextDC’s operations in Footscray.”
Not in the sourcesThe analysis is from the University of Melbourne.
SupportedFor two decades, data centres were seen as safe, lucrative real-estate investments.Business + Economy – The Conversation: “For two decades, data centres were relatively safe, lucrative real estate investments.”
SupportedFirmus cancelled its multibillion-dollar Australian stock-market listing because of a lack of investor demand.Business + Economy – The Conversation: “Data centre company Firmus abruptly cancelled its multi-billion dollar listing on the Australian stock exchange, due to a lack of investor demand.”
SupportedLondon-based Nscale is struggling to attract buyers for a Wall Street listing.Business + Economy – The Conversation: “Similarly, London-based data centre developer Nscale is struggling to attract buyers for a stock market listing on Wall Street.”
SupportedCoreWeave shares fell 15% in one day last week amid concerns about its financial strength.Business + Economy – The Conversation: “Shares in CoreWeave, which claims to operate the world’s most powerful AI supercomputer , dropped 15% in one day last week on concerns about its financial strength.”
SupportedThe global investment pipeline for AI infrastructure is expected to reach about US$10 trillion (A$14.25 trillion) by 2032.Business + Economy – The Conversation: “The pipeline of investments is expected to reach some US$10 trillion (A$14.25 trillion) by 2032.”
Partly supportedMuch of the spending on AI infrastructure has been funded by borrowing.Business + Economy – The Conversation: “Until recently, much of the capital expenditure was funded internally by the AI companies or by raising money directly from investors; more recently, they have been borrowing vast sums in the corporate bond market.”
SupportedVictoria’s AusNet is reviewing data-centre connection requests totalling more than 10 gigawatts, which could exceed the state’s entire supply capacity.Business + Economy – The Conversation: “In Victoria, transmission company AusNet is reviewing requests from data centres for more than 10 gigawatts of connections, which could exceed the state’s entire supply capacity .”