How ASX data centre shares are racing for the cloud

While cloud computing is nothing new, the growth in demand continues to pick up pace.

A cloud with a blue arrow pointing upwards through its middle symbolising a rising asx share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX data centre shares are seeing ever-growing demand from cloud computing, spurred on by COVID-19 work-from-home changes.

Which leads me to ask this question…

Do you remember the first time you heard the term 'in the cloud'?

For me, it was back in 2007. The Netherlands-based company I was working for at the time had its own mainframe computers humming away in a back room.

While the wardrobe­-sized machines did the job, they were expensive to maintain. And that back room got hot! So the company's president, eager to be at the cutting edge of technology, investigated shifting a huge trove of data into what he called 'cloud computing'.

Now I knew he couldn't be talking about sending data into the literal clouds – of which you tend to find plenty in the Netherlands. But it took a while to understand that, really, all the cloud represents is banks upon banks of computers located offsite in data centres.

We'll get to those, and the fast-growing demand for cloud computing, shortly.

But first…

Who coined the term 'cloud computing'?

The idea of storing your digital data offsite has been around for more than 50 years.

But it seems that Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) – Google to you and me – gets the credit for coining the term cloud computing. Or more specifically, Google's CEO Eric Schmidt, who first used the term at a conference in August 2006.

With remarkable prescience, Schmidt said at the time (quoted by MIT Technology Review):

What's interesting [now] is that there is an emergent new model. I don't think people have really understood how big this opportunity really is. It starts with the premise that the data services and architecture should be on servers. We call it cloud computing – they should be in a cloud somewhere.

Emergent new model indeed…

The growth and growth of cloud computing

For an idea of just how fast cloud computing is growing Down Under, we turn to the Australian Bureau of Statistics (ABS). According to the ABS Characteristics of Australian Business report, released last week, 55% of Australian businesses are leveraging paid cloud computing. That's up from 42% in 2017-18 and up from 31% in 2015-16.

Commenting on the ABS data on cloud-computing growth, Karl Durrance, director of enterprise at Amazon Web Services (AWS) said: "The past year accelerated our shift to a digital world and highlighted an even more urgent recognition of the problems we need to address together to drive our economy and society forward."

AWS pointed to a report it commissioned from consulting firm AlphaBeta, titled 'Unlocking APAC's Digital Potential: Changing Digital Skill Needs and Policy Approaches'. The report found "43% of Australia's digital workers, who are not applying cloud-computing skills today, believe it will be a requirement to perform their jobs by 2025".

Then there's the IDC Australia Future of Work Survey 2020 that AWS also pointed to. According to the survey, "69% of local organisations indicated that working from home, or a hybrid mix of working from home and in the workplace, will become the norm".

As most of us don't have our own servers stuffed in our back rooms, arguably the demand for cloud computing and the ASX data centre shares that secure the data could be set to keep growing.

Which brings us back around to…

2 ASX shares focused on data centres

NextDC Ltd (ASX: NXT) is one of Australia's leading independent operators of data centres. The company has a network of nine data centres spread across the biggest capital cities.

NextDC shares began trading on the ASX in 2010. Today, the ASX data centre share has a market capitalisation of around $5.1 billion and is part of the S&P/ASX 200 Index (ASX: XJO).

The NextDC share price was up by 4.23% to $11.33 by yesterday's close. That puts the company's shares up by around 23% over the past 12 months. Year to date, NextDC shares have gone the other way, down around 7% so far this year.

A second ASX data centre share is better known as one of Australia's largest housing developers, which also has a large commercial property footprint.

I'm talking about Stockland Corporation Ltd (ASX: SGP), which isn't technically a data centre share just yet. In fact, the company doesn't actually own any data centres – but that's about to change.

As the Australian Financial Review reported yesterday, Stockland is getting ready to build its first data centre at its M Park development in Sydney:

The NSW Government rushed through approval for the data centre, which it said has an end value of $264 million, as a State Significant Development (SSD).

'Fast-tracking data centre assessments are a key part of the NSW government's planning reforms,' said Planning Minister Rob Stokes.

It's understood the five-storey data centre will be a hyper-scale facility leased to a major cloud computing provider, believed to be Amazon Web Services.

Stockland has a market cap of around $11.4 billion and pays a dividend yield of 4.6%, unfranked.

The Stockland share price, which edged 1.27% higher in Tuesday's session, is up by around 21% in the past 12 months. Year to date, the company's shares have gained around 15%.

Should you invest $1,000 in Transurban Group right now?

Before you buy Transurban Group shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Transurban Group wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Technology Shares

a group of people sit around a computer in an office environment.
Earnings Results

Guess which ASX 200 tech stock is rocketing 12% on record results

Another half, another record result from this high-quality company.

Read more »

Man on his laptop standing next to data centres.
AI Stocks

3 reasons to buy this $9 billion ASX 200 AI stock today

A leading expert forecasts this $9 billion ASX 200 AI stock will deliver “meaningful earnings upside”.

Read more »

Business people discussing project on digital tablet.
Technology Shares

After its result, what does Macquarie think Xero shares are worth?

Here's what the leading broker is saying about this tech stock.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Technology Shares

Gentrack share price down 5% on half-year results

Let's unpack what was reported.

Read more »

Man with rocket wings which have flames coming out of them.
Technology Shares

Which ASX All Ords stock is jumping 14% on big counter-drone news

Investors are responding positively to news of a big contract win.

Read more »

Two plants grow in jars filled with coins.
Technology Shares

2 ASX growth shares I'd buy with $5,000 right now

I’m bullish about these two stocks with compelling growth potential.

Read more »

A woman on a green background points a finger at graphic images of molecules, a rocket, light bulbs and scientific symbols as she smiles.
Technology Shares

Growth investors should put these 2 top ASX tech shares on the watchlist

I think growth stocks from the tech sector could be exciting options.

Read more »

One girl leapfrogs over her friend's back.
Technology Shares

This ASX 200 tech stock would have doubled your money in a year. Is it too late to buy now?

After more than doubling in a year, here’s what Macquarie expects next for this soaring ASX 200 tech stock.

Read more »