Why I think this ASX 200 share at a 52-week low is a strong buy

Demand for data centres is growing rapidly as businesses invest more in cloud computing and artificial intelligence (AI).

And one share on the S&P/ASX 200 Index (ASX: XJO) is positioning itself to benefit from that spending, with a substantial amount of future business already secured.

I think its long-term prospects look very promising despite what its recent share price weakness might suggest.

Here's why.

NEXTDC Ltd (ASX: NXT)

NEXTDC is one of Australia's leading data centre operators, providing the infrastructure that businesses need to store and process enormous amounts of information.

I like its position in the market because building data centres is becoming increasingly complicated.

Companies need access to suitable locations, reliable electricity supplies, and high-quality connectivity. NEXTDC has spent years developing these capabilities and establishing relationships with major customers.

With demand for AI and cloud services continuing to increase, I believe the company has a significant opportunity to expand its operations.

And there is already evidence of that growth. The ASX 200 share generated underlying EBITDA of $216.7 million in FY25, which increased 15% to $248.8 million in FY26.

Management is now guiding for underlying EBITDA of between $385 million and $410 million in FY27. That represents potential earnings growth of approximately 55% to 65% in just one year.

But I think the longer-term outlook is even more exciting.

NEXTDC has secured substantial customer commitments for data centre capacity that is still being developed.

As those facilities become operational and customers start paying for their contracted capacity, the company expects its existing contracts to eventually support more than $1 billion in annualised contracted EBITDA.

That is approximately four times what NEXTDC generated in FY26, demonstrating just how much larger the business could become in the not-so-distant future.

Why is this ASX share falling?

Despite this outlook, this ASX 200 share has fallen to a 52-week low of $9.75 on Tuesday, around 42% below its 52-week high of $16.78.

I suspect concerns about the enormous investment required across the AI infrastructure industry are contributing to the weakness.

The recent failed IPO of Firmus Technologies has also raised questions about investor confidence in the sector.

NEXTDC faces its own challenges. Building new facilities requires substantial capital, and construction delays, rising costs, or funding pressures could affect its growth plans.

Nevertheless, I think the strength of its contracted demand provides some reassurance.

Customers have already committed to substantial future capacity, giving NEXTDC a clearer growth path than many companies hoping to benefit from the AI boom.

Foolish takeaway

I think NEXTDC shares are a strong buy at around $9.75.

The next few years will involve substantial investment and execution, but the earnings potential is becoming increasingly clear.

For me, the prospect of this ASX 200 share growing into a much larger business makes today's share price an opportunity I would be happy to take.

The post Why I think this ASX 200 share at a 52-week low is a strong buy appeared first on The Motley Fool Australia.

Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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