Is NextDC the hottest ASX growth stock right now?

Artificial intelligence (AI) infrastructure is a trending theme amongst investors right now. And for good reason. For those searching for the next ASX growth stock, it’s a solid hunting ground. The surge in AI demand is driving unprecedented need for processing power, data storage, and highly secure and scalable infrastructure.

In the next five years, Australia’s data processing power requirements are set to more than double and the big players (think Amazon, Microsoft, Google) are likely to need more local infrastructure. This is leading to energy concerns, with requirements forecast to reach up to 35 terawatt hours annually by 2030.

NextDC Ltd (ASX: NXT) is well placed to deliver on a number of fronts. And as one of few pure-play data centre options , it’s a hot ASX growth stock for future-focused investors.

The independent data centre operator builds and runs a nationwide network of powerful, secure, and energy-efficient data centres. And energy efficiency is key, with integrated solutions including solar arrays and smart microgrids built into its centres.

A rapid expansion pipeline for this ASX growth stock

NextDC operates 20 data centres nationally, with imminent plans for nine more across Sydney, Melbourne, Gold Coast, Geelong, and Darwin. It also has an international expansion strategy, with centres planned for Tokyo, Kuala Lumpur, Bangkok, Singapore, and Auckland. 

It’s H1FY26 results highlighted its strong performance against the prior corresponding period with:

• 13% net revenue increase
• 9% underlying EBITDA increase
• 137% growth in contract utilisation

The bull case for this ASX growth stock is clear. A hot industry, ever-growing demand, and a reliable operator who is committed to energy efficiency.

The bear case for NextDC

Valuation is high. It’s currently sitting at a 24 to 25 times price-to-sales ratio, an exceptionally high valuation. That said, it’s potential is massive, and I believe it’s one of the stocks that can justify this multiple.

It’s not yet profitable with significant cash burn. It reported a net loss after tax of $39.4 million in the half to 31 December 2025. Which again, in and of itself, isn’t a huge concern, as long as you have conviction in its mission. The data centre business is capital intensive, and if NextDC is going to execute on its ambitious growth plans, there’s no way around that.

And that’s the other risk, execution. While NextDC has a solid track record thus far, projects of this scale will always carry execution and financial risks. Construction and supply chain bottlenecks could lead to project delays and, if capital market conditions weaken, balance sheet leverage could be under pressure.

Is NextDC a buy at the current price?

Valuation is high, it hasn’t reached profitability, and there are some significant potential execution risks. But, for me, the answer is still a resounding yes for this ASX growth stock. It offers direct access to the AI and cloud infrastructure market, with booming demand for data centres creating an impressive long-term growth runway. In my opinion, there is significant upside here for investors, even at the current share price.

The post Is NextDC the hottest ASX growth stock right now? appeared first on The Motley Fool Australia.

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• Up 29% since April, should you buy NextDC shares today?
• Buy, hold, sell: James Hardie, NextDC, and WiseTech shares

Motley Fool contributor Melissa Maddison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Microsoft. The Motley Fool Australia has recommended Amazon and Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.