Surging demand from AI and various other data needs for cloud computing and data centers is more than offsetting weakening investment from mining, which has traditionally been the driver of new private business capex in Australia.
The latest private investment data for the March quarter, released Thursday by the Australian Bureau of Statistics, revealed that the solid 1% rise in business investment in the quarter was driven by a nearly 61% surge in spending on new data centers and the machinery, equipment, and services needed to fit them out and get them operational.
The 1% rise was slightly stronger than the 0.8% rise in the December quarter and saw total investment rise by 5.5% compared to a year ago (which is a rise in real terms).
Listed groups like NEXTDC are leading the data center drive, raising hundreds of millions of dollars in new capital and planning expansion here, as well as in markets like NZ, Malaysia, and China. Macquarie Technology is another listed company rapidly expanding in the sector.
Unlisted Air Trunk is another company driving demand for new centers and equipment (it's on the market for $15 billion and, according to media reports, with first-round bids due Friday, May 31).
Amazon, with its AWS cloud business, Microsoft Azure, and a growing list of other companies, are building or organizing data capacity deals and capacity, with much of the growth coming from AI and using technology from giants like Nvidia.
The surge in new equipment and machinery for data centers saw a 3.3% rise in overall investment in non-mining industries in the March quarter, as spending by non-mining businesses grew by 4.6%, offsetting a 3.2% drop from mining investment.
And even though there was a rise in spending on new data centers (which need buildings to contain the equipment), capex on new buildings and structures fell by 0.9% in the quarter as investment in mining sectors fell because of "reduced spending on major iron ore projects and LNG projects during the quarter,” according to the ABS’s Mr. Ewing.
Queensland had the largest rise among the states and territories, up by 5.9% in the March quarter. The biggest fall was in Western Australia, down by 6.7%, reflecting the fall in mining capex, especially with many renewable mineral miners cutting spending or postponing new developments and expansions.
In addition to the March quarter data, the ABS also issued the second estimate for 2024-25 investment, which jumped by 6.8% to more than $165 billion from the first estimate of $155 billion.
That's the highest second estimate since the March quarter of 2012 (when it was more than $172 billion).
