Data centre stocks surge as AI demand reignites HMC Capital’s $2bn bet

The rally in data centre-related stocks could signal that the worst is over for the HMC Capital satellite DigiCo. Picture: iStock

The resurgence in the price of data centre-related stocks in the past month could see the bullish data centre acquisitions made by HMC Capital finally start to pay off.

The sector rally in recent weeks comes down to a combination of factors, including data showing hyperscalers like Amazon and Google, have strong demand for more storage after industry heavyweight Microsoft signalled earlier plans to pull back on expansion development globally amid concern that DeepSeek, the free-to-use AI model built in China, was eating into its market share.

It comes as the march of the artificial intelligence revolution takes hold, with an increasing amount of data storage needed for AI technology.

Goodman Group shares are up over 9 per cent in the past month, NextDC almost four per cent, but DigiCo REIT share have staged the biggest recovery – up 20 per cent in the last month.

DigiCo REIT listed late last year at $5 a share after paying top dollar for data centres with its market value at $2.8bn. But the float failed to gain traction in the market and its share price fell as low as $2.32 in April.

On Thursday, shares closed at $3.90, closing the gap on its net tangible assets of $4 per share.

Also adding momentum to the sector is a recent announcement by Amazon that it would increase its data centre investment in Australia by 50 per cent.

The rally could signal that the worst is over for the HMC Capital satellite DigiCo, with the group on track to gain hosting certification for government groups and groups that conduct government work at its flagship Sydney 1 data centre asset on the fringe of the Sydney CBD by August.

The data centre is currently one third full, and the certification will enable it to attract government tenants and see a lift in earnings with the asset fully leased.

The Sydney 1 asset comprises two large scale adjoining data centre sites in Sydney, representing the only large-scale data centre campus less than 1km from the CBD.

The NSW state government has prohibited more data centres in Sydney’s Macquarie Park, but Goodman Group has a data centre development at Artarmon on Sydney’s north shore.

A number are located at Eastern Creek but are some way from the Sydney CBD.

Earlier, the price of data centres on the direct market had come back 30 to 40 per cent since hitting fever pitch last year and some of that was also because hyperscalers were changing the way they dealt with developers.

In earlier times, data centre developers such as Goodman Group agreed a deal with large cloud service providers to build their complexes.

But the experience for the cloud providers has not always been positive, where the developer withdraws from the project, or the data centre produced does not adequately meet their needs.

Now they are asking groups to build the data centre on spec.

It means that only large groups with a strong balance sheet like Goodman Group can compete in the market.

DigiCo consists of the data centre that David Di Pilla’s HMC Capital purchased from Global Switch Australia for about $2bn before the listing, and there were concerns at the time that the group had over paid.

DigiCo also purchased the iSeek data centres for $400m, paying well over and above other bidders.

The opportunity on the data centre front is to put the iSeek business together with the $1bn Fujitsu data centres in Australia, which were also for sale last year, and gain synergies.

Demand for data centres was best demonstrated last year when Blackstone paid $24bn for industry giant AirTrunk.