NEXTDC sits at the intersection of powerful secular trends: cloud computing, AI infrastructure, and data sovereignty. The company will almost certainly grow. Five years from now, it will likely be a larger business by most conventional metrics. The harder question is whether each share will be worth meaningfully more.

Here's why I'm avoiding the stock.

·     Capital Intensity Creates a Structural Headwind

NEXTDC operates one of the most capital-intensive business models in the market. Billions must be deployed years before meaningful returns materialize. Shareholders fund this growth long before cash flows improve, creating a persistent gap between economic activity and shareholder value creation.

This structure makes the company unusually vulnerable to capital market conditions. When credit tightens or equity markets turn, growth either slows or dilution accelerates. Neither outcome favors existing shareholders.

·     Dilution Erodes Per-Share Value

The share count continues climbing through both equity raises and employee incentives. Revenue and EBITDA can deliver impressive growth rates while per-share metrics lag behind. This isn't a temporary phase, it's embedded in the business model. As long as growth requires external capital, dilution remains a structural feature rather than a temporary inconvenience.

·     Long-Duration Assets in a High-Rate Environment

Most of NEXTDC's value sits in cash flows projected years into the future. This makes the stock acutely sensitive to discount rates, investor sentiment, and capital availability. When rates rise or risk appetite falls, long-duration assets get repriced aggressively. The company's growth story doesn't protect it from this reality.

·     Customer Concentration and Bargaining Power

Hyperscalers represent both the opportunity and the risk. These customers are large, sophisticated, and have alternatives. They negotiate aggressively, can build their own infrastructure, and can defer deployments when it suits them. This dynamic puts sustained pressure on margins and makes revenue less certain than it appears.

·     Infrastructure

Data centers don't just need customers, they need electricity and water. Grid congestion, rising energy costs, and regulatory uncertainty all create real operational constraints. Strong demand means nothing if the power infrastructure can't support it or if water availability becomes a political issue.

·     Execution Risk Is Underappreciated

Delays in construction, regulatory approvals, or grid connections flow directly through to equity value. The market prices in aggressive growth assumptions. Any slippage, whether from permitting issues, contractor delays, or infrastructure bottlenecks, rerates the stock immediately. AI demand is irrelevant if projects can't be delivered on schedule.

·     Technology Risk Sits on the Horizon

The assumption underlying every data center investment is that workloads will continue requiring centralized, latency-sensitive infrastructure at scale. But technology evolves. Edge computing, improved compression, more efficient chips, or breakthroughs in distributed architecture could all reduce the need for massive centralized facilities. This risk is distant but not negligible, and the market isn't pricing it in.