Key takeaways
OpenAI has partnered with Australian data center operator NextDC to build a large-scale AI infrastructure facility in Sydney, marking the artificial intelligence company's first major expansion in the Asia-Pacific region and its inaugural office in Australia.
The two companies signed a Memorandum of Understanding on Friday to develop what they describe as a "next-generation hyperscale AI campus and large-scale GPU supercluster" valued at A$7 billion, equivalent to $4.6 billion.
The facility will be located at NextDC's S7 site in Eastern Creek, approximately 45 kilometers west of Sydney's central business district.
Strategic expansion in Asia-Pacific
The announcement comes as OpenAI CEO Sam Altman pursues an aggressive global expansion strategy, courting businesses and governments worldwide amid intensifying competition with Alphabet's Google, Meta Platforms, and other technology giants.
Australia has emerged as a regional hotspot for data center investment, attracting billions in capital as companies and governments adopt AI services.
Jason Kwon, OpenAI's Chief Strategy Officer, told reporters in Sydney that the decision to invest in Australia was driven by "the momentum that Australia has when it comes to AI."
He added that the center will have "some of the most sophisticated architecture and infrastructure for AI models in all the APAC region," according to Bloomberg.
Major infrastructure investment
The facility is designed to provide 550 megawatts of capacity, with the initial phase scheduled for delivery in the second half of 2027.
The project will serve OpenAI's Australian clients, including Commonwealth Bank of Australia, retail conglomerate Wesfarmers, design platform Canva, and Virgin Australia.
Craig Scroggie, CEO of NextDC, emphasized the project's national significance.
"It's billions in investment, it's thousands of jobs, it will be a world-leading piece of sustainable digital infrastructure that will demonstrate that Australia can be a leader in digital infrastructure and artificial intelligence," Scroggie told iTnews.
Financial markets responded positively to the announcement, with NextDC's shares soaring as much as 11 percent during Friday trading in Sydney before closing 3.1 percent higher, valuing the company at approximately A$9 billion.
Government support and economic impact
The Australian government welcomed the investment, highlighting its potential to create thousands of direct and indirect jobs during construction, as well as ongoing technical, manufacturing, engineering, and operational positions.
The project will utilize long-term power purchase agreements for renewable energy sources and incorporate next-generation cooling technology that does not require drinking water.
Australian Treasurer Jim Chalmers praised the development, stating, "It's more proof Australia has the talent, clean energy potential, trade partnerships, and policy settings needed to be one of the big winners when it comes to AI."
Growing AI infrastructure market
Australia's data center industry has attracted significant international investment in recent years.
In 2024, the Canada Pension Plan and Blackstone purchased Sydney-based data center operator AirTrunk for A$24 billion.
Amazon has announced plans to invest A$20 billion to expand its Australian infrastructure by 2029, while Microsoft committed to a A$5 billion investment in 2023 to expand its data center portfolio in the country.
According to forecasts by economics consultancy Mandala, Australia's deployable data center capacity is projected to more than double to 3.1 gigawatts by 2030 from 1.35 gigawatts in 2024, representing an additional investment of more than A$26 billion over the period.
The Australian government recently released a framework for a national AI roadmap focused on boosting investment, expanding infrastructure and skills, and embedding AI across public services.
NextDC has increased its capital expenditure guidance for fiscal year 2026 by A$400 million to scale capacity for this project and related developments.
The Brisbane-headquartered company has established itself as one of the region's largest data center operators, with major facilities in Australian cities. It plans to expand into Auckland, Tokyo, and Kuala Lumpur.
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