Coming up, communities are fighting the data center buildout in Australia. What does it mean for investors? It's next.
You're listening to SBS on the Money with Ricardo González.
Hi everyone, it's Wednesday the 22nd of October 2026, a day when the Australian share market actually rose. We'll have details of that soon. Plus, is a merger of Elon Musk, SpaceX, and Tesla on the way? Tom Kennedy will speak with tech analyst Dan Ives soon. But first, Australia's largest listed data center operator, NextDC, lost around $2 billion off its value today, and it follows a downgrade triggered by delays at one of its data centers in suburban Melbourne. A power distributor has suspended network upgrades like taller power poles to boost electricity to the site because of community and stakeholder opposition. Council is seeking more consultation, but the company had already factored in business from the planned works. As a result, it's downgraded full-year revenue guidance from as much as $640 million to $500 million. Shares tumbled 42% as a result, bringing other data center operators down along with it. The broader market rose though after being in the red for much of the session. And to explain all of that, I spoke with Luke Larate from Seneca Financial Solutions. Luke, let's talk about the broader market first. The ASX opened higher but by lunchtime fell. What's driving investor sentiment at the moment, and how much of it today anyway has to do with the direction of Australian interest rates? Because we heard from the RBA deputy governor today.
Yeah, Ricardo, I think that was the main kind of bearish shift in the market today. Citi conferences had the RBA speaking there and saying that inflation's not going too good. So that's sort of bearish for the markets, and maybe rates need to go higher, or rate expectations need to move higher. Higher interest rates, higher risk-free rate, lower valuations for shares and all other risk assets. So that's been the major shift, but pretty broad-based selloff across the market today. There is some pockets of green — telco, you know, Seek's going okay on its update on its fund, but other than that, it's a pretty kind of mediocre negative day.
You know who hasn't been doing well today? NextDC. Their shares in the data center builder down as much as 40% at one point today. It's the nation's largest listed data center builder. It follows a profit downgrade, a revenue downgrade because of community opposition to works on one of its suburban Melbourne data centers. What can you tell me about this project, and how serious is it for the company?
Yeah, look, I mean it's pretty serious from a shareholder's perspective. NextDC is priced on expected future sales and future growth in its business. So when a key capital city major growth project is delayed, maybe stalled, maybe, you know, going to be opposed heavily, that's going to be a significant downgrade to their future earnings. And that's the reaction you're seeing to, you know, this particular incident. I think the contagion type vibe with NextDC is what the share market's really worried about. Has NextDC lost its social license to operate here, or have data center providers more generally lost their social license to operate? Are they going to be in a position now where growth, despite having, you know, insatiable demand, they're unable to actually build these facilities in locations that have access to power, water, a community that's happy to have them, you know, nearby, and are still close enough to the businesses and the people that want to use them. So yeah, it's an interesting dynamic. We don't own NextDC at Seneca. We think it's one of the more expensive ways to play the AI thematic, and I think a good example of, you know, why you shouldn't be chasing thematics and sort of broad-based ideas. In reality, you need to get into the weeds with individual companies and make sure you understand just exactly what it is you're buying.
What do you think it says about the whole AI data center picture more broadly? Because this isn't the first project to be hit by growing community opposition to the data center buildout. We know that this data center buildout is helping to grow the economy with so much business investment. What does it mean for investors more broadly looking at this space?
I think it means we need to be careful about valuations and the amount of the future that we price into today's numbers and today's market capitalizations. I don't think it says too much about the global capex spend or demand for AI. I think, as I sort of alluded to with NextDC though, it is how these digital assets essentially interact with the physical world and the people who inhabit that physical space. So, you know, I'm not sure how each community is going to react. I'm certainly not sure how each data center is going to engage, and each data center company is going to engage with community. I think similar to other potentially community damaging projects, like say the mining industry is probably a good caveat. Big capex required up front, but can be a big employer and big economic driver. I think maybe some of these data center companies need to learn from the likes of the BHPs and the Rios of the world, who do have really good kind of community engagement. They are a real participant in the community, and they're not just there kind of soaking up resources. And in particular, these data centers, you know, once they're built, they don't employ a lot of people. So it's not even as beneficial necessarily as a mining company. So yeah, I think it's going to be a really interesting period for these data center businesses specifically because you've got a lot of multinationals asking for the demand to build these things. But it seems like the community is starting to say, hey, well, you know, are we going to have enough water? Are we going to have enough power? Right.
And in wrapping up, what are you telling your clients right now? Where do you see the opportunities for investors?
I think there's plenty of opportunities in the market at the moment. We're actually quite bullish. I think when the markets feel bearish, you know, have been flat and down for most of the year, that's when the best opportunities arise. I think some of these rate-sensitive names are getting quite beat up at the moment, whether that's sort of real estate companies, the gold miners, some of the more, you know, high-growth tech names, not necessarily in data, but more in software. There's plenty of opportunities on the ASX at the moment. It's really just making sure, you know, you're building a diversified portfolio of ideas, such that you're not relying on sort of one thing happening.
Luke Larate there from Seneca Financial Solutions. Let's go to the US now, where a merger of Elon Musk, SpaceX, and his electric vehicle company Tesla may be on the cards. The entrepreneur touted the idea as he unveiled a stronger-than-expected 161% surge in quarterly revenue year-on-year at his space exploration and communications company. AI revenue, which he actually called super intelligence in its annual report, is now driving the largest share of the SpaceX business, jumping ninefold. For more, Tom Kennedy spoke with Dan Ives. He's the senior managing director at Wedbush Securities in the US.
So Dan, SpaceX has just reported, and its AI business is now bigger than Starlink and far bigger than the rocket side of the business. So what's your read on the result, and what does the shift mean for the company? I mean, is SpaceX now an AI company overall?
Yeah, this is really a monster quarter, but it really shows that SpaceX is becoming one of the biggest AI revolution names in the market. I think this is just the beginning, and it's exactly what the street wanted. And ultimately, I think, you know, when it comes to Tesla and so many other things that they could do, this is a stock that could go a lot higher.
So, what is your read on the potential for a Tesla merger? Do you think it's a good idea, and what would the implications be if it were to happen?
Yeah, we've said over the last year, I mean, there's over an 80% chance that this happens in terms of walking down the aisle, Tesla and SpaceX, by the end of next year. And I think it's a no-brainer because it's the golden vision of Musk gets all the AI, all the data, what could be unified chip all under one hood. And I think it's something, it's a matter of when, not if.
And was there anything in the report today that particularly caught your eye, or anything that perhaps you weren't expecting, or exceeded your expectations?
