NextDC Freezes New Data Centre Projects as Melbourne Power Delays Expose the Cracks in the AI Building Boom

Australia’s biggest listed data centre operator has slammed the brakes on its expansion. NextDC announced on Monday, 9 November 2026, that it will stop work on all projects that do not already have a signed customer contract, after power delays and community opposition at its flagship Melbourne site wiped billions off its value and forced it to cut its earnings forecasts.

The decision is a sharp change of direction for a company that was once described as Australia’s most prolific data centre developer. It also sends a warning to the whole artificial intelligence (AI) industry: building the giant computer halls that power AI is no longer just about money and demand. Getting electricity to the site, and winning over the neighbours, can now stop a project in its tracks.

What NextDC announced

NextDC chief executive Craig Scroggie told the UBS Australasia conference on Monday that the company would now only build where it has firm customer backing. “Anything that didn’t have a customer contract and a customer commitment that we absolutely have to deliver on is now no longer a priority,” he said.

He did not say how many projects would be paused. According to the company’s 2026 annual report, NextDC had 11 centres in development or in the planning stages. All of those without a signed customer will now wait.

Scroggie said the top priority was to win community backing for the delayed Melbourne project, known as M3. “That work can’t restart until we clearly communicate that we’ve solved this problem,” he said.

The announcement came on the same day that two of NextDC’s rivals finalised a big purchase of its shares. Goodman Group and its New York-listed partner Digital Realty bought a combined 9.9 per cent stake in NextDC last week for A$715 million (about $492 million), after the share price plunge. The two buyers said there was no takeover plan “at the moment”, but flagged possible collaboration. Reuters reported that NextDC’s share price has since recovered the ground it lost after the earnings downgrade.

What went wrong in Melbourne

The trouble centres on M3, NextDC’s flagship data centre expansion in West Footscray, in Melbourne’s west. The site is only partly running: about 42 megawatts of capacity came online during the 2026 financial year, with a further 165 megawatts still under development.

The problem is power. Getting enough electricity to the site requires major grid works by Jemena, the local electricity network operator. Jemena suspended parts of that work in September after community opposition, and the next increase in grid supply to M3 is not expected before mid-2027.

Residents near the site objected to the works, which involve replacing wooden power poles with 15-metre industrial poles carrying lines rated at up to 66,000 volts through residential streets. In Yarraville, residents blocked Jemena crews from working, leaving cars and bins in the street. The facility itself sits about 15 metres from nearby homes, and residents have also complained about diesel generators and noise.

The delay hit NextDC hard. In October, the company cut its net revenue guidance for the year from A$615 million to A$640 million down to A$475 million to A$500 million, removing about A$140 million of M3 contracts from its forecasts. Its shares crashed, closing down 41.7 per cent at A$5.35 on 21 October — the lowest since 2018 — after falling as much as 44 per cent during the day. The one-day fall wiped about A$3 billion off the company’s value. The shares had traded above A$16 as recently as June.

Why this matters beyond Australia

NextDC’s troubles are not happening in isolation. They are part of a wider pattern in which the AI data centre boom is running into physical limits: electricity grids that cannot keep up, water supplies under strain, and communities pushing back.

Only last week, Google announced it would invest another US$15 billion in Malaysia over 2027 and 2028 to expand its data centres there, on top of a US$2 billion pledge made in 2024. The new money will expand Google’s existing campus at Elmina Business Park in Selangor and build new campuses in Selangor and Negeri Sembilan, including a 389-acre site at Port Dickson with capacity estimated at between 500 megawatts and 1 gigawatt. Google says the construction phase will support more than 37,000 local jobs a year and the campuses will create over 9,000 long-term jobs, while 800,000 Malaysians will be upskilled over five years.

But even that giant investment comes with strings attached. The Malaysian government has imposed strict environmental conditions on data centre operators. Google has partnered with the national power company Tenaga Nasional to add more than one gigawatt of new clean energy capacity to the grid, and it is funding a water project — an off-river storage reservoir and a treatment plant able to supply 65 million litres of drinking water a day — at a cost of US$160 million.

The reason for the caution is clear. Malaysia already hosts about 60 per cent of data centre capacity in Southeast Asia, and data centres are forecast to consume one-third of the country’s total energy by 2035. The International Monetary Fund expects Malaysia’s economy to grow by 5.2 per cent in 2026, helped in part by data centre activity — but the energy and water demands are now a national debate.

Elsewhere, the same pressures are showing up in different ways. In Finland, authorities ordered work halted on two of Google’s data centre sites until environmental impact assessments are completed. And AI companies themselves are starting to buy their own power: Anthropic is spending US$3.4 billion on gas generators to power its AI data centres.

Investors are getting nervous

The financial markets have noticed. A month-long slide in technology and AI-related stocks came to a head this week with the biggest one-day drop for the S&P 500 technology sector in more than six years, according to Reuters. Investors are worried that the huge spending on data centres may slow down, partly because of the US midterm election results and partly because of doubts about how quickly the AI boom will pay for itself.

The numbers tell the story. The technology sector’s forward price-to-earnings ratio — a measure of how much investors are willing to pay for each dollar of expected profit — fell to 17.1, according to LSEG Datastream. That is below the ratio for the overall S&P 500, which stood at 17.9. It is the first time since 2017 that tech stocks have been valued more cheaply than the wider market on this measure.

The sell-off has spread around the world. South Korea halted stock trading after its KOSPI index plunged 8.5 per cent in the global AI sell-off, and Taiwan activated a NT$500 billion rescue fund and curbed short selling after its worst week since 2001. Nvidia, the chipmaker at the heart of the AI boom, has seen its shares slide as it investigates claims that its chief executive Jensen Huang was targeted by a foreign intelligence operation.

None of this means the AI boom is over. The S&P 500 was still up nearly 8 per cent for the year, and the tech sector was up about 11 per cent, even after the sell-off. But the mood has changed. The question investors are now asking is not whether AI needs more data centres — it clearly does — but whether companies can build them fast enough, and profitably enough, to justify the spending.

What “customer-backed only” really means

NextDC’s new rule — build only where a customer has already signed — sounds like common sense. But it marks a real shift in how the data centre industry works.

Until now, the biggest operators have often built first and filled the space later, betting that demand from cloud companies and AI firms would always arrive. That model works when power connections are quick and neighbours are welcoming. It breaks down when a single grid delay can knock a third off your earnings forecast and wipe billions off your share price.

By insisting on signed contracts, NextDC is shifting the risk. If a customer has committed, the project is worth fighting for — with the grid operator, the local council and the community. If nobody has signed, the company would rather wait than spend money on a building it cannot power.

The approach also buys time. Winning back community support in West Footscray will not happen overnight, and the grid work cannot restart until the company can show residents it has solved the problem. In the meantime, rivals Goodman Group and Digital Realty now own almost a tenth of the company — and will be watching closely to see whether the pause becomes a recovery or a takeover opportunity.

What happens next

Three things will decide what happens to NextDC from here.

First, the Melbourne power works. Jemena has not said when it will resume the grid upgrades for M3, and the next increase in power supply is not expected before mid-2027. Until that timetable firms up, the 165 megawatts still under development at M3 remain in doubt.

Second, the community. Scroggie has made winning local backing his stated top priority. How the company handles residents’ concerns about poles, noise and generators will determine whether the project can restart at all — and whether other Australian data centre projects face the same kind of opposition.

Third, the wider market. NextDC reports its next results against a backdrop of falling tech valuations and growing questions about AI spending. If customers keep signing contracts, the “customer-backed only” strategy will look like sensible discipline. If demand slows, the pause could turn into a much longer freeze.

For the rest of the industry, the lesson is already clear. The AI boom created a race to build data centres. The winners of the next phase will not just be the companies that can raise the most money — they will be the ones that can get power to the site, keep the water flowing, and keep the neighbours on side.

Frequently asked questions

What is NextDC?

NextDC is an Australian data centre operator listed on the Australian Securities Exchange. It builds and runs large data centres that house the computer servers used by cloud companies, businesses and AI firms. It has been described as Australia’s most prolific data centre developer.

What is the M3 data centre?

M3 is NextDC’s flagship data centre expansion in West Footscray, Melbourne. About 42 megawatts of capacity came online in the 2026 financial year, with a further 165 megawatts under development. Its expansion has been delayed because the electricity grid works needed to power it were suspended after community opposition.

Why did NextDC’s shares fall 42 per cent?

The shares fell after the company cut its earnings forecasts in October 2026, blaming power delays at M3. It cut net revenue guidance from A$615–640 million to A$475–500 million. The shares closed down 41.7 per cent at A$5.35 on 21 October, wiping about A$3 billion off the company’s value.

Who bought a stake in NextDC?

Goodman Group and its New York-listed partner Digital Realty bought a combined 9.9 per cent stake for A$715 million (about $492 million) after the share price plunge. They said there was no takeover plan “at the moment” but flagged possible collaboration.

What does “uncontracted projects” mean?

Projects that do not yet have a signed customer contract. NextDC says it will now only build data centres where a customer has already committed to using the space. Projects without that backing are paused indefinitely.

Is the AI data centre boom over?

No — but it is slowing down and facing new limits. Companies are still investing billions, including Google’s US$15 billion in Malaysia. What has changed is that power supply, water, community opposition and investor doubts about returns are now shaping where and how fast data centres get built.

Conclusion

NextDC’s decision to freeze uncontracted projects is a small announcement with a big message. The AI era needs enormous amounts of computing power, and data centres are the factories that provide it. But factories need electricity, water and willing neighbours — and in Melbourne, all three ran short at the same time.

The company’s shares have recovered some of their losses, and two powerful rivals now own a stake in its future. Whether the pause turns out to be a sensible reset or the start of a longer struggle will depend on power lines in West Footscray, residents in Yarraville, and a stock market that is no longer willing to fund the AI boom without asking hard questions first.

For now, the age of building data centres first and asking questions later is over — at least in Australia.

Sources

• Reuters: https://www.reuters.com/world/asia-pacific/nextdc-pauses-uncontracted-projects-after-australian-data-centre-woes-2026-11-09/
• Channel News Asia: https://www.channelnewsasia.com/business/nextdc-pauses-uncontracted-projects-after-australian-data-centre-woes-6535716
• Reuters: https://www.reuters.com/business/tech-set-still-sway-us-stock-markets-course-despite-ai-driven-swoon-2026-11-09/
• Channel News Asia: https://www.channelnewsasia.com/watch/google-commits-another-us15-billion-expand-data-centre-operations-in-malaysia-6524316
• Malay Mail: https://www.malaymail.com/news/malaysia/2026/11/04/google-commits-additional-us15b-to-malaysia-data-centre-expansion-over-two-years-projects-37000-jobs-as-anwar-hails-investment/241985

This article is for general information and education only. It is not legal or financial advice.