A neighbourhood dispute over power poles that wipes $3 billion off a listed company's value in a single day.
asserted
that → wipe → day
And trillion-dollar global infrastructure build-out getting a wake-up call from the burbs.
asserted
out → get → burbs
An industry that has ignored the concept of "social licence" is colliding with people committed to their communities.
asserted
that → ignore → communities
And investors are feeling the financial consequences.
asserted
investors → feel → consequences
Australia ringing the alarm on AI valuations
It's a long way from West Footscray to Wall Street.
asserted
It → ring → Street
But as the speed of communicating information has fallen to milliseconds, the titans behind trillion-dollar deals in our AI-boom economy may have spent time looking up "WeFo" on Google Maps, reading about plans for Tasmanian data centres and wondering: is this where it started to unravel?
uncertain
it → communicate → centres
Let's step back.
asserted
's → let → ?
Shares in data centre operator NEXTDC fell 42 per cent in a single day after the company revealed that delays in getting power to a proposed expansion of its massive complex in inner-west Melbourne meant its future earnings would be cut by a third.
asserted
earnings → fall → third
A neighbourhood dispute and an act of civil disobedience, residents parking their cars in the street to deny trucks access, had stopped the march of industrial-scale power poles that would provide the juice for the next stage of the data centre.
asserted
that → park → centre
Firmus hit a similar hurdle.
asserted
Firmus → hit → hurdle
The AI data centre company wanted to list on the stock exchange with an initial public offering (IPO) that would have valued it at about $44 billion.
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that → want → billion
It would have been one of the five biggest floats in the world this year, the biggest in Australia since Telstra went from being government-owned to listed on the markets.
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Telstra → go → markets
But it fell apart.
asserted
it → fall → ?
The key one was that large investors didn't think the company was worth what the company thought it was.
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it → think → what
They declined to buy it at $11 a share, which would value it as one of the 20 largest firms in Australia, more valuable than toll road operator Transurban and supermarket giant Coles.
asserted
which → decline → Transurban
But the others are important, too: growing community opposition to power and water-hungry data centres and the transmission lines needed to feed them; fears about the job-killing nature of artificial intelligence; the collision of election cycles in the US and Australia with voter unhappiness about economic instability and uncertainty.
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others → grow → instability
AI not dead, but hitting resistance
The idea of social licence is that it's the ongoing acceptance and approval of an organisation's activities by people affected by them and society at large.
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it → hit → them
Whaling has lost its social licence.
asserted
Whaling → lose → licence
Very few countries now kill whales.
asserted
countries → kill → whales
AI and data centre companies, spawned from the "move fast, break things" ethos of the tech sector, rapidly evolved from medium-sized warehouses in industrial areas to massive facilities closer to homes.
asserted
companies → spawn → homes
They became the physical manifestation of people's fears about AI.
asserted
They → become → AI
Standing outside NEXTDC's massive facility, the behemoth is undeniably dystopian.
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behemoth → stand → facility
Devoid of any visible staff, the entirely black box rises vastly above the single-story brick and weatherboard houses on the other side of the street.
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box → rise → street
Protests in Europe and the US tuned leaders to the bad vibes coming from constituents.
asserted
Protests → tune → constituents
They didn't see the benefits of facilities that pushed up power bills, soaked up precious water resources and appeared to be in the business of making masses of people unemployed.
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masses → see → people
But don't expect the sector to go away.
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sector → expect → ?
As analysts at Morningstar detail, NEXTDC's assets, "both current and planned, are still in great demand".
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assets → plan → demand
In addition, community concerns over the centres may increase costs and force new ones further away from built-up areas:
"However, this will affect all developers, will likely be factored into new contracts, and will likely make existing data centres even more valuable."
A single-street power pole dispute that costs $3 billion
There's a reason
uncertain
that → increase → billion
NEXTDC's difficulties are getting attention.
asserted
difficulties → get → attention
It exposes the fragility of the AI boom that is already occurring on a scale the world has rarely seen.
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world → expose → scale
Filip Tortevski, senior analyst at Wealth Within, calls it the "first serious warning shot" as investors weigh if this is an isolated incident or the beginning of something much bigger.
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this → call → something
"What's concerning isn't simply the $140 million in revenue affected by electricity delays," they write.
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they → concern → delays
"It's the potential chain reaction nobody was pricing in.
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nobody → price → ?
NEXTDC has acknowledged that delayed customer billing could affect its ability to draw on $6.7 billion in available debt facilities.
uncertain
billing → acknowledge → facilities
It has also warned that the delays could affect property valuations, with the financial impact still unknown.
uncertain
impact → warn → valuations
A delay in connecting electricity can potentially affect revenue, financing flexibility and asset values simultaneously."
asserted
delay → connect → revenue
UniSuper's chief investment officer John Pearce helps manage $175 billion in assets.
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officer → help → assets
Before the Firmus float was pulled, he wished the company well and explained why the fund wouldn't invest a cent in it.
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fund → pull → it
"It all comes down to valuation.
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It → come → valuation
We think that Firmus indeed has a compelling story.
asserted
Firmus → think → story
…and 7 more, not listed.
The Aporia
