COVID-19 ramped up demand for data, but the exponential growth trend was already there. What does that mean for ASX 200 data centre shares?
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COVID-19 certainly accelerated the global demand for digital data storage as people turned to working, shopping, and socialising from home.
However, the exponential growth trend in global data usage was in place long before the pandemic. That trend looks to continue for years to come. This could offer some healthy tailwinds to S&P/ASX 200 Index (ASX: XJO) data centre shares.
Data demand growth forecast is “daunting”
Lee Seok-hee is the CEO of South Korean tech share giant SK Hynix Inc (KRX: 000660), which has a market cap of approximately AU$108 billion.
As Bloomberg reports, Lee:
[E]xpects exponential growth in data and bandwidth consumption spurred by new technologies like 5G networking, artificial intelligence and self-driving cars. So-called hyperscale data centers are set to double in number by 2025 to 1,060… providing the infrastructure and distribution systems for everything from social media and online gaming to smart agriculture and connected factories.
According to Lee, “The total amount of both structured and unstructured data is expected to increase exponentially. If you look at the capacity requirement of DRAM and NAND Flash for each data centre, the numbers are daunting.”
One leading ASX 200 data centre share
There are a number of quality ASX shares involved in data storage and chip manufacturing.
As demand for data storage continues to rocket, NEXTDC should continue to see growth in the demand for its services. The company also has plans to potentially expand its operations into Singapore and Japan.
UBS, for one, believes NEXTDC has a bright future, with a buy rating and a $15.40 price target on its shares. That’s almost 42% above the current price of $10.87 per share.
Share price snapshot
Up 1.4% in intraday trading today, NEXTDC shares remain down 12.5% in 2021.
Over the past 12 months, the NEXTDC share price is up 56%. That compares to a 49% gain on the ASX 200.
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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