Data centre disasters: Why you should think twice before buying Maas Group and NextDC shares

It's been a rocky month for the Australian data centre sector. 

Over the past couple of weeks, two ASX-listed stocks have grabbed investors' attention. 

In a matter of weeks, Maas Group Ltd (ASX: MGH) went from being a relatively unknown small-cap industrials stock to dominating financial news headlines. As a major investor in Firmus Technologies, Maas' share price rode the wave surrounding Firmus' proposed IPO before spectacularly crashing when it failed to list. 

Shortly after, it was NextDC Ltd (ASX: NXT)'s turn to command the spotlight. Unlike Maas Group, NextDC was already a widely recognisable stock. It had long been seen as one of the few ways to gain exposure to artificial intelligence on the ASX, and is consistently assigned a buy rating from many experts. 

In fact, up until last week, every analyst covering the company had a buy rating on NextDC shares, with an average price target of $20.54.

However, that narrative came crashing down to earth when the ASX-listed data centre operator released an earnings downgrade late last week, sending its share price down 42% in a single session.

Buying the dip: Ingrained behaviour

Buying the dip has become firmly ingrained behaviour among Australian retail investors. 

For S&P/ASX 200 Index (ASX: XJO) investors, this strategy has generally worked out very well in recent times. 

Since 2009, the index has been on an upward trajectory. 

The ASX's steep decline during COVID gave many retail investors the opportunity to buy cheap shares for the first time and make a significant profit. 

According to ASIC, approximately one in five Australian investors began their market journey during the pandemic era. With the ASX rallying strongly in 2021, their first experience buying the dip on ASX shares was generally very positive. 

This behaviour has continued in more recent downturns. When the ASX fell in March 2026, a record number of Australian investors added to their portfolios, according to the Australian Financial Review.

However, while the ASX 200 has endured upward momentum over the past 15 years, this has not applied to all individual shares.

Rather, certain individual stocks have not been so fortunate.

For example, after peaking at more than $160 in 2021, Domino's Pizza Enterprises (ASX: DMP) remains down more than 80%. Similarly, Magellan Financial Group (ASX: MFG) and Flight Centre Travel Group Ltd (ASX: FLT) remain down more than 80% from their peaks.

Safe to say, buying the dip does not always work out. 

So, what about Maas Group and NextDC? Will they bounce back and double your money, or keep deteriorating?

Here's a few things to consider before you jump in and buy shares.

Maas Group

Maas Group shares have endured a recent roller coaster. 

When Firmus looked likely to IPO at $44 billion, Maas Group shares rallied strongly. Between April and September, the share price climbed more than 70%. It then declined nearly 50% when the IPO was called off. 

As reported by the Australian Financial Review, despite having a market capitalisation of less than $2 billion, Maas Group was the 10th-most traded stock last week on Australia's largest retail brokerage, CommSec. Approximately 72% were buy orders, with retail investors applying the 'buy the dip' mentality.

When retail investors were snapping up Maas Group shares, institutional investors were bailing out. 

Several fund managers exited after concluding that Maas Group's future is too closely tied to Firmus' future.

Maas Group owns a 3.2% stake in Firmus and has $1.1 billion in contracts for electrical engineering work required for Firmus' planned data centre network across Australia. 

As reported by the Australian Financial Review, SG Hiscock portfolio manager Phillip Li provided the following analysis on whether Mass' status as a 'cheap' stock made it a buy candidate: 

Cheap isn't a thesis on its own…The big question is where the next leg of orders comes from, and that depends on Firmus funding its pipeline. Until we get those answers, we're not buyers.

In other words, the risks currently outweigh the potential benefits according to several experts.

NextDC

Then it was NextDC's turn to endure a steep decline.

As an established data centre player, NextDC has long been a popular choice for Australian investors seeking exposure to AI on the local exchange. Based on this positioning, many retail investors may view NextDC shares as a 'quality stock on sale' following its sharp fall.

However, before jumping in, there are a few red flags to consider. 

Unlike software businesses, data centres are extremely expensive to build and operate.

Capital expenditure has soared in recent years, increasing from $690 million in FY23 to $4.5 to $5 billion in FY27 (based on guidance).

At the same time, the company expects to make just $475 to $500 million in revenue in FY27. This is just around one-tenth of capital expenditure.

Therefore, to fund expenditures, the company has conducted several capital raises. Since NextDC listed at $1.10, its share count has increased nearly 10 times, from around 80 million to more than 750 million. That increase has exceeded the share price gains. Therefore, capital has been destroyed along the way despite the share price rising.

Another point to consider is NextDC's valuation. Last week, Goldman Sachs released a report on the global data centre sector. It noted that the average pure-play data centre stock traded at an FY27 EV/EBITDA of 22 times. Before declining, NextDC traded at 26 times, making it one of the most expensive data stocks in the sector. This suggests that it may now be trading closer to fair value rather than a screaming bargain.

Foolish Takeaway

Warren Buffett famously taught us to "be fearful when others are greedy, and be greedy only when others are fearful."

However, this mentality should not be applied blindly. Sometimes a large share price decline is a genuine warning that a company has serious risks or had become far too expensive, warranting the correction.

To truly invest like Buffett, you must also be sure that the company's valuation is attractive and that the level of risk is justified.

The post Data centre disasters: Why you should think twice before buying Maas Group and NextDC shares appeared first on The Motley Fool Australia.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2026