NextDC shares plunged more than 40 per cent on Wednesday, wiping about $3 billion from the company’s market value after the data centre operator cut profit forecasts and construction spending when a power upgrade for its West Footscray M3 facility was suspended.
The suspension followed community and stakeholder opposition that led energy distributor Jemena to stop work on upgrading local power infrastructure, while the local council withheld consent pending further consultation. NextDC said the interruption has delayed the delivery of contracted capacity to customers and forced the company to reassess its near-term plans.
Chief executive Craig Scroggie told investors the group would not progress work at any site without a confirmed customer commitment and flagged the company was looking at contractual options, including force majeure, in relation to affected customers.
“We are not going to continue any work on any sites that don’t have an existing customer commitment,” Scroggie said on an investor conference call.
The technical issue stems from the scale of power needed at M3. Jemena needed to upgrade supply from typical suburban voltages to 66,000 volts, which involved replacing wooden poles with steel structures up to 22 metres high. That plan prompted strong resistance from nearby residents and delayed works that were already suspended in September and subsequently notified to NextDC.
NextDC’s share price had helped lift the company’s market value above $11 billion earlier this year as demand for AI computing capacity accelerated. The sudden re-pricing has also hit sentiment around other listed players and pipeline transactions, contributing to the cancellation of the planned ASX listing for Firmus and pressure on peers including US-listed IREN.
Analysts said the magnitude of the sell-off may overstate the long-term damage but acknowledged real execution and funding risks. Morgans analyst Nick Harris described the market reaction as overly pessimistic if the issues are short term, while noting investors are increasingly nervous about further delays given NextDC’s heavy funding commitments.
Morningstar analyst Dan Baker warned that community opposition could raise development costs and push new data centres further from established suburbs. UniSuper chief investment officer John Pearce has also expressed scepticism about pure infrastructure plays, arguing that the major winners from AI will be firms that use the compute, rather than those that simply build it.
The company has said the rest of its operations remain strong, with large, highly rated customers in place, and that it will remain in compliance with its financial covenants despite the downgrade. NextDC also announced a freeze on further land purchases and said it would not rule out asset sales to shore up flexibility while it works through the disruption.
Legal and shareholder scrutiny has followed the announcement. Shine Lawyers has opened an investigation into whether NextDC issued guidance without reasonable grounds or failed to disclose material impacts after providing forecasts, and it is exploring a potential class action on behalf of shareholders. Jonathan Wertheim, head of Shine’s class actions practice, said the firm will examine the company’s recent representations to investors and capital raisings.
For customers waiting for additional compute capacity, the immediate implication is delay. NextDC has told investors it is assessing contractual remedies and will provide more detail ahead of its shareholder meeting on November 20 in Sydney.
NextDC is a major developer and operator of data centres that sells capacity to large cloud and AI customers. The episode highlights a growing tension between rapid infrastructure expansion to meet AI demand and the local community resistance that can slow or halt projects, with implications for project timing, costs and the financing profiles of listed infrastructure operators.
