Goodman Group's Stock Surge Amid AI Boom

By Aaditya GovindRao and Roushni Nair
(Reuters) – Goodman Group's stock has seen significant growth this year, outperforming its Australian real estate peers, driven by a surge in demand for data centers due to the artificial intelligence boom.

Global hyperscalers like Amazon, Microsoft, and Meta are investing billions in data centers to meet the rising demand for AI services. Despite being a nascent market, Australia has experienced large investments, such as Blackstone's acquisition of AirTrunk for A$24 billion in September and NEXTDC's nearly A$4.6 billion raised in equity and debt.

Goodman, Australia's largest property developer, serves the world's biggest hyperscalers, although it has not disclosed their identities. Its data center construction projects constitute 42% of its A$12.8 billion portfolio as of September, an increase from 37% at last year’s end.

As a result, Goodman's stock has skyrocketed by 45.8% this year, marking its best performance since 2006 and making it the top performer in the Australian real estate index.

John Lockton, head of investment strategy at Sandstone Insights, noted that Goodman's higher exposure to developing data centers has led to a willingness in the market to pay more for the business. He expects ongoing growth due to the capital expenditure outlook for hyperscalers for FY25.

Opinions are divided on the sustainability of Goodman's stock rise. Some investors are cautious as interest in data-center-focused stocks appears to be cooling, exemplified by DigiCo Infrastructure REIT's A$2 billion IPO which saw its stock drop 9% on debut.

Morningstar analyst Winky Yingqi Tan expressed concerns that Goodman's stock may be overvalued and highlighted risks of data center obsolescence and increased supply from competitors that could negatively impact returns.

Contrarily, Lockton remains optimistic about Goodman's future, praising its strong project pipeline and access to land with power supplies necessary for data center conversion — something that rivals find challenging to secure.

($1 = 1.6093 Australian dollars)