NEXTDC (ASX:NXT): Valuation Check After OpenAI AI Campus and GPU Supercluster Agreement

NEXTDC (ASX:NXT) just stepped into the global AI spotlight, signing a Memorandum of Understanding with OpenAI to co develop a next generation hyperscale AI campus and GPU supercluster in Sydney.

See our latest analysis for NEXTDC.

The announcement lands after a choppy stretch, with a 90 day share price return of minus 22 percent and a 1 year total shareholder return of minus 12.44 percent. However, a strong 3 year total shareholder return above 50 percent hints that long term momentum is still alive even if near term sentiment has cooled.

If this OpenAI partnership has you thinking more broadly about AI infrastructure plays, it could be worth exploring high growth tech and AI stocks for other high growth tech names shaping the next wave of computing.

With the share price under pressure but analysts seeing more than 50 percent upside from here, the real question is whether NEXTDC is still trading at a discount to its AI future, or if the market has already priced in that growth.

Price-To-Sales of 20.3x, Is It Justified?

Based on the latest numbers, NEXTDC’s A$13.51 share price equates to a rich valuation when you look at its revenue rather than its earnings.

The price to sales ratio compares the company’s market value to the revenue it generates, a useful lens for fast growing but unprofitable data center operators like NEXTDC. In simple terms, investors are currently paying 20.3 times the company’s annual sales, which reflects high expectations for future revenue expansion and eventual operating leverage.

Relative to the global IT industry average price to sales ratio of around 1.5 times, NEXTDC’s 20.3 times multiple is extremely elevated and indicates that the market is pricing in a premium growth story. Even against its own estimated fair price to sales level of 16.3 times, the current valuation sits well above the regression implied range, which may leave less room for disappointment if the growth path or margins fall short.

Explore the SWS fair ratio for NEXTDC

Result: Price-to-Sales of 20.3x (OVERVALUED)

However, risks remain, including potential delays or cost overruns on new hyperscale builds, as well as slower than expected AI related demand ramping from key enterprise customers.

Find out about the key risks to this NEXTDC narrative.

Build Your Own NEXTDC Narrative

If you see the story differently, or want to dig into the numbers yourself, you can build a custom view in minutes: Do it your way.

A great starting point for your NEXTDC research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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