Australian data centre listings deepen financing concerns in AI infrastructure

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Australian data centre financing concerns

Highlights

Firmus withdrew a planned A$44bn ($30.5bn) IPO and AirTrunk cancelled a Singapore REIT listing, underscoring rising financing challenges for AI data centre projects.
Investor concerns over large-scale debt—Firmus expected to need $30bn borrowing at 6x projected 2028 earnings—and collapsed Project Southgate deal drove bearish sentiment and retreat from high-leverage operators.
Australia's data centre pipeline rose to 23GW from 6GW since February, but market preference is shifting to established operators with long-term contracts over newer, highly leveraged entrants after failed capital raisings.

Failed capital raisings unsettle AI infrastructure funding

As first reported by the Financial Times, the latest market turbulence is tied to the withdrawal of a major Australian share sale by Firmus, a data centre operator backed by Nvidia and Blackstone, followed days later by AirTrunk's decision to cancel a Singapore listing of a real estate investment trust vehicle because of market conditions.

Those setbacks emerge as chip and AI-linked stocks remain under pressure from rising inflation concerns and investor unease over the scale of borrowing required to support planned data centre buildouts. On Thursday, CoreWeave chief executive Mike Intrator cites the delayed or abandoned financings of Firmus, AirTrunk, Lambda Labs and Nscale in a memo seen by the FT as part of the negative narrative affecting his company, whose bonds have traded below 80 cents on the dollar, a level often associated with distress.

Firmus had sought a valuation of A$44bn, or $30.5bn, in what would have been Australia's second-largest IPO. Investors also balked at the group's expected need to raise as much as $30bn of debt after listing to fund construction across Australia and Asia, a leverage profile that some market participants say would amount to six times projected 2028 earnings.

The offering is further hurt by the disclosure, a week before the planned listing, that Project Southgate, a multibillion-dollar deal between CDC and Firmus, had collapsed, according to a person with direct knowledge of the situation. Firmus says it is pursuing private and public funding alternatives for its Asian expansion and maintains that its domestic projects, including in Tasmania, remain on track.

Australia's AI investment case faces a credibility test

The financing setbacks risk complicating Australia's push to position itself as a hub for AI and data centre investment, an effort supported by its renewable energy buildout and pitches to global groups such as Anthropic and OpenAI. In a June speech in Sydney, Assistant Minister for Science, Technology and Digital Economy Andrew Charlton says investors are choosing Australia for its political stability, Five Eyes ties and power potential.

The failed float also exposes valuation tensions within the local market. Firmus, founded in 2019 as a bitcoin miner in Tasmania before pivoting to AI infrastructure, was seeking a valuation roughly double that set only three months earlier and above more established peers such as NextDC, Goodman Group and CDC Data Centres. Some large investors, including UniSuper, decline to participate because of that pricing.

Despite the setback, the broader buildout continues. Commonwealth Bank says Australia's data centre pipeline stands at 23 gigawatts based on public announcements, up from about 6 gigawatts in February, though only about a quarter has been approved or is under construction. Economist Lucinda Jerogin of Commonwealth Bank says the pipeline is expanding rapidly and still offers attractive features for overseas investors.

Investors now appear to be drawing a sharper line between established operators with long-term contracts and newer groups pursuing aggressive funding plans. SharonAI, the Sydney-based Nasdaq-listed company trading under ticker SHAZ, still intends to seek a secondary Sydney listing, but its shares have fallen close to a fifth over the past five days. Jun Bei Liu, founder and lead portfolio manager at Ten Cap, says long-term opportunities remain in well-supported AI and data centre businesses, while conditions are becoming tougher for "get rich quick" entrants.

In our earlier article on the AI-linked stock selloff driven by rate fears, we explained how hotter inflation data revived expectations of Federal Reserve hikes and pushed tech shares lower. We also noted that investors were increasingly focused on the higher cost of financing large-scale AI infrastructure, with heavily indebted data-center players and their bonds coming under particular pressure.

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