Goodman Group, an Australian industrial property firm, is gaining favor with investors as it shifts its focus to AI data centers. This move has led to a significant surge in its stock price, with Citi predicting a double-digit growth in earnings.
What Happened: Goodman Group is converting its conventional warehouses into data centers to meet the soaring demand for AI infrastructure. This trend is expected to drive a “double-digit medium-term earnings growth,” as per Citi, which has included the Australian stock in its “Pan-Asia Focus list,” reported CNBC.
Data centers are essential for housing critical computing infrastructure and equipment. The demand for these facilities has seen a sharp rise due to the rapid expansion of AI applications, which require substantial computing power to run complex AI models.
“The conversion opportunity of Goodman’s assets from traditional warehouses into data centers presents a robust growth opportunity,” said Citi analyst Howard Penny. “As it progresses opportunities in data centers, it is likely to deliver a large range of products from powered sites and turnkey projects.”
Goodman Group, based in Sydney and also traded in the United States, has access to over 4 gigawatts of electric supply across twelve major cities where it already owns real estate. Electricity has been a significant bottleneck for many data centers, limiting further expansion.
The stock has surged by over 40% this year in anticipation of its business model change. Citi’s price target of 40 Australian dollars ($26.50) per share suggests a potential 12% increase from the current price of 35.67 Australian dollars.
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Why It Matters: The shift by Goodman Group to AI data centers aligns with a broader trend in the tech industry. Michael Dell, CEO of Dell Technologies, recently highlighted the rapid pace of AI adoption, comparing it to the internet boom of the mid-1990s. Dell noted that AI’s impact is unfolding “maybe 10 times faster” than previous technological waves.
Moreover, global governments are heavily investing in AI infrastructure to ensure strategic self-reliance. These investments are expected to generate nearly $10 billion in revenue for companies like Nvidia Corp this year. This trend underscores the critical role of data centers in supporting AI advancements.
Additionally, Amazon Web Services is negotiating with the Italian government to invest billions in expanding its data center operations in Italy. This move is part of Amazon’s strategy to enhance its cloud services across Europe.
Investors are also eyeing Asia as a prime target for data center investments. Private equity firms like KKR & Co Inc and Bain Capital are making substantial investments in the region, driven by the surge in AI and cloud services.
Photo courtesy: Pixabay
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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