As AI shifts from software to physical infrastructure, Australia’s land, energy and security profile position it to benefit.
Artificial intelligence (AI) is shifting from a software narrative to a capital-intensive infrastructure buildout. What began as a race to develop models is now driving demand for physical assets – including large-scale compute facilities, power supply, transmission, batteries and connectivity – and that shift is widening the set of potential beneficiaries beyond global technology leaders. Australia is well placed to capture this opportunity with the security, land and energy profile to benefit.
My recent trip to Singapore reinforced this dynamic, where the limitations of a dense, land-constrained market are shaping how AI infrastructure is deployed across the region. While Singapore remains attractive for its stability and capital access, the practical requirements of ‘AI factories’ (large-scale compute facilities rather than traditional manufacturing plants) have pushed development into neighbouring markets, including Malaysia and Batam in Indonesia. These facilities are highly specialised data centres: large, energy-intensive sites housing advanced servers, where the majority of capital is directed towards computer hardware, particularly NVIDIA (NASDAQ: NVDA) chips, rather than the buildings themselves.
Australia is unlikely to capture the highest-value component of the AI stack, but it screens well as a destination for the supporting infrastructure. Its ‘Five Eyes’ status, political stability and perceived security are attractive to global technology companies, while access to land, power and water provides a practical advantage. Outside of the US, Australia sits among the more compelling locations globally for this next phase of development.
Large compute facilities are better suited to regional areas, where land availability is greater and projects can be co-located with renewable energy generation, batteries and transmission infrastructure. South Australia and Tasmania stand out in this regard. By contrast, metropolitan locations can face greater community resistance, particularly where large, industrial-style developments are located close to residential areas.
The investment implications follow the infrastructure footprint. Contractors involved in building data centres and transmission networks, alongside companies exposed to renewable energy and storage, are most likely to see increased activity. Data connectivity providers, such as Megaport (ASX: MP1), also play a role, as rising data intensity drives demand for flexible network capacity, even if their exposure differs from hyperscale operators.
Australia’s advantage in the AI cycle is grounded in its ability to host and support infrastructure – enabling the systems that power the algorithms, rather than owning the algorithms themselves.
