The Nextdc Ltd (ASX: NXT) share price has jumped 7% after the data centre owner revealed a significant agreement with OpenAI.
Nextdc builds and operates data centres, which are critical infrastructure for AI systems to run. Data centres are the infrastructure platform for the digital economy, delivering the critical power, security and connectivity for global cloud computing providers, enterprise and government. Nextdc says it has a strong focus on sustainability and operational excellence through renewable energy sources and delivering “world-class operational efficiency”.
Nextdc reveals agreement with OpenAI
The business said that it’s building the next generation of sovereign AI infrastructure in Australia.
Nextdc said it’s pleased to announce that today it agreed a memorandum of understanding (MoU) with OpenAI to develop a sovereign AI infrastructure partnership under the OpenAI for Australia program.
Under the memorandum of understanding, OpenAI and Nextdc will collaborate on the planning, development and operation of a next-generation hyperscale AI campus and large-scale GPU supercluster.
This will be located at Nextdc’s S7 site in Eastern Creek, Sydney.
Nextdc said it will provide more information as and when appropriate.
What to make of this update
There is clearly strong demand for data centres because of the growing AI usage and other digital services.
OpenAI (with ChatGPT) is one of the highest-profile data centre users. It’s a great sign for Nextdc that OpenAI wants to work with it.
While this agreement alone could provide a very pleasing boost for the ASX share’s revenue, but it could also be a signal that OpenAI could decide to work with Nextdc with future data centres.
Is the Nextdc share price a buy?
The Nextdc share price has already reacted to today’s news, so it’s not as good value as it was yesterday.
The company clearly has a future of revenue growth ahead. But, I’m not sure how profitable it’s going to be. It’s investing a lot in opening new data centres, which aren’t cheap. At this stage, there are quite a wide array of possible outcomes for data centres and AI.
It has fallen 20% since the September peak, so this could be a useful time to consider the business. But, there are other ASX growth shares I’d rather buy amid this volatility.
