Brokers are Raving About this ASX 200 Tech Share Benefiting from Generative AI
According to a recent trading update, NextDC Ltd (ASX: NXT) shares could be one way to gain exposure to the tech sector and generative AI. The update revealed that recent customer wins have increased its contracted utilization by 43%, or 35.9 megawatts (MW), to 120MW since 31 December. Its new S3 data center in Sydney has been a key driver of this growth.
Brokers are overwhelmingly bullish on this ASX 200 tech share and have been reiterating their buy ratings in recent days. The team at Goldman Sachs, which has a buy rating and improved price target of $14.90 on its shares, was impressed with its update and believes that global tech giant Microsoft might have been responsible for much of the increase. Over at Citi, its analysts responded by retaining their buy rating on the ASX 200 tech share with an improved price target of $14.45.
Citi was particularly pleased with the longer than normal contract length, which could be a sign of a strong demand outlook. Citi said, "The key positive from the contract announcement was the hyperscale customer committing to a contract with a long billing ramp (5-6 years vs. 2-3 typically) which points to a strong demand outlook but more importantly suggests that the customer could have been concerned about supply constraints in the Macquarie Park area."
Morgans was pleased with the news and retained its add rating with an improved price target of $13.50. It also appears to believe Microsoft could be NextDC’s big customer. Morgans said, "Microsoft has recently cancelled its planned Data Center build in Lane Cove Sydney. They had applied for development approval for a 100MW DC build but after a prolonged period the council only approved a 30MW facility and Microsoft opted not to proceed with this. At the same time that Microsoft looks supply constrained demand remains incredibly strong."
Investors may not be able to buy shares in ChatGPT, but they could potentially get indirect exposure to its incredible growth through this ASX 200 tech share.
