Data centres have the power to bring in significant investment gains, say E&P analysts

Data centres will continue to be good investments in 2025, with NextDC making gains after it found new ground in Melbourne and Macquarie Technology Group expected to land lucrative contracts, analysts predict.

The investment option will be in demand due to the AI boom, in which AI models are being trained across multiple data centres.

That’s the view of E&P analysts, who also see green shoots in software, largely due to AI agents, which are able to perform tasks much like a human worker would.

“AI agents look like they are the real next technology trend in software after SaaS – agents that are able to act with autonomy and perform a job in some roles already as a substitute for a human, in others as an augmentation for a human,” E&P’s technology sector 2025 preview read.

Richard White’s WiseTech was a company that could go one of two ways, “hinging on the success” of a new Container Transport Optimisation product, which had its launch delayed but was expected to produce significant savings for customers, analysts said.

Jack Dorsey’s Block was one of E&P analysts’ “top picks”, with expected revenue improvements after one of its main businesses, Square, benefits from more integration within its mobile app.

Square’s focus on building out a “larger and better” sales output, bolstered by the appointment last year of Afterpay founder Nick Molnar as its sales chief, is expected to lead to a decent return for the business.

Afterpay’s integration into Cash App, a US trading app and digital wallet, was also expected to help the US fintech beat expectations, analysts said.

Meanwhile, cloud accounting giant Xero is expected to achieve consensus, and SiteMinder, a commerce platform for hotels, is expected to benefit from increased travel.

Analysts said they could not spot “any holes” in TechnologyOne’s investment thesis.

Analysts noted NextDC’s share price had taken a hit as investors became “impatient” waiting for pending deal announcements, which was not unusual for its trading pattern.

“The demand outlook looks good though, with strong feedback around deal activity from all the hyperscalers as well as general international read-throughs,” analysts said.

E&P saw the company’s construction plans in Melbourne as a “pre-cursor” to deal activity.

A good majority of those were in Melbourne, which had grown increasingly attractive as data centre players sought more space and energy to build new facilities.

Melbourne, as reported by The Australian last year, is home to 75 per cent of all new projects, according to an M3 Property report released in October.

Macquarie Technology Group is expected to have a quiet first half but could enjoy a win in the second half as construction on its IC3W data centres progresses and the company gets closer to leasing some of its capacity, analysts said.

The company last year received regulatory approval to expand its existing development plans for IC3W from 56 megawatts to 63 megawatts.

Network services company Megaport begins the year having positioned the market with low expectations, which might see the company avoid large losses, E&P analysts said.

The company might also benefit from foreign exchange rates, having previously set expectations of the dollar trading at US66.8c.

“Assuming the market is sophisticated enough to understand this, we believe Megaport’s recovery will likely be a second half of the calendar year event,” analysts said.

This content originally appeared on The Australian.