Chapter 1: What is the main topic discussed in this episode?
ABC Listen. Podcasts, radio, news, music and more. Hello, I'm Fran Kelly and every day on the Radio National Hour, I take a deep breath and dive in.
If you can have a chip implanted in your brain to help control traumatic memory, then all you have to do is drop the adjective traumatic and it can control memory. And he said, we'll just take your stomach out. And in my head I was like, how do you live without a stomach? We're a funny species, Fran. You know, I think we're the only animal who seems to be hell-bent on their own destruction.
So if you want to know how to live without a stomach or more about David Wenham's ideas for world peace, come find me on the Radio National Hour right here on ABC Listen.
Artificial intelligence is taking over the world, not just the share market, but also our power supplies, our water and maybe our workforces.
Chapter 2: What impact is AI having on the demand for data centers?
Now, one of the companies that's at the centre of this revolution is Australia's NextDC, listed on the ASX, currently valued at $10 billion almost. And it's been building data centres in Australia for 15 years, but it's now taking off because of AI.
Last week, it announced a huge increase in its order book and a capital raising of $1.5 billion in order to build more data centres all around Australia. Craig Scroggie has been the chief executive of Next DC for its entire 15 years existence. And he joins me now for this week's interview. G'day, Craig Scroggy. Thanks for joining us on This Business.
It's great to be here, Alan.
Now, we can see that there's something pretty remarkable going on with AI this year, just in the share prices of the AI businesses and semiconductor companies. Can you just give us a sense of what you're seeing, starting with your own company, and what's happening to demand for what they call compute in your centres?
But NextDC, Alan, is a builder of large-scale data centers all over the country. We build metropolitan data centers in the cities that support hospitals and emergency services, defense, and other critical infrastructure, most like people would use every day for their online transactions.
But we also build these big hyperscale and artificial intelligence facilities that are supporting the next era or the fourth industrial revolution. So the beginning of the build out of the new infrastructure that will support AI. We build data centers all the way at the edge where submarine cables land in Australia, and they also support
ground telemetry stations for satellite support and many other applications in remote and regional areas. And that's as remote as the Pilbara in Western Australia, all the way up to Darwin, the top of the country, and around each of the major cable landing station areas, the Sunshine Coast, Geelong and other locations.
So our business, Alan, is building the digital infrastructure that supports legacy computing, enterprise, banks, telcos, We build for the biggest hyperscale operators in the world for cloud computing. And we build for artificial intelligence, for GPUs and the production of knowledge. How many people do you employ?
Today, the company's about 500 full-time employees and probably about 4,000 or 5,000 in contract roles. So you've got development, construction, all of the other supply chain components to that. So yeah, it's... A large site, Alan, a large construction site has more than one to 1,100 people on site every day. And we've got those going all over the country today.
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Chapter 3: How is NextDC adapting to the AI boom?
What is the build rate of data centers and the growth in demand around the world?
Well, it's extraordinary in every region. We will open our first international facility in Malaysia in downtown Kuala Lumpur in two weeks' time, Alan. So we'll be bringing a new hyperscale artificial intelligence facility to Malaysia the enterprise and cloud AI markets in Malaysia for those key enterprises there in the Asia region. We're also building in Japan and Tokyo as well.
So from a regional point of view, there is no shortage of demand. It's a historical high for the securing of data center capacity and the building of new capacity because the sheer size and scale of what needs to be built is literally thousands of megawatts. And that's bigger than all of the historical compute infrastructure that has been installed today.
And how does the growth rate in Australia compare with the rest of the world? Are we sort of keeping up or falling behind or what?
Australia is a very, very significant player globally in cloud computing and AI. certainly significantly in advance of our population size. Australia serves not only Australian enterprises, but it serves the region as well for compute. We are a trusted location for global compute to be deployed because of our security status. So a stable political environment,
a clear regulatory environment and also a trusted Five Eyes security partner.
So Australia has actually really punched above its weight, Alan, in our role in cloud computing and will now, because of the abundance of land and the ability to grow and scale renewable energy, solar, wind, battery, we will have an outsized opportunity for Australia to be a global leader in the development of digital infrastructure for artificial intelligence.
Well, I'll get onto that in a moment. I just wouldn't mind a brief primer for our listeners as to what's actually going on with compute. Because, I mean, what we're talking about, I think, is the creation of tokens, which are the currency or the basic unit of artificial intelligence. Are you able to simply tell us what's actually taking place
uh when when these tokens are created and the extent of power and so on that's required yeah let's go back in history just to touch alan to give context to digital infrastructure so traditionally computers were hosted in office buildings so if you're a bank or a telco you ran your own systems over the course of the last decade we've moved those computers out of on-premise office buildings
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Chapter 4: What are the energy requirements for AI infrastructure?
so as artificial intelligence becomes a much larger feature of the digital infrastructure landscape they will be built very large and low lying and they're actually built in quite a different way they're not built necessarily with the same security or resiliency requirements because artificial intelligence has a slightly different use case in the production of tokens so yes they do take up a significant amounts of land they can be built in
areas further out from cities or in regional areas. And predominantly, you'll see them focused around areas where we can secure large-scale energy or connectivity to the NEM so that access to transmission and generating infrastructure is a key feature of being able to produce thousands of megawatts of power to run artificial intelligence.
Now, in March, the federal government released a series of expectations of data centres and AI infrastructure developers. And they say meeting these national expectations will be the foundation of their social licence to operate in Australia. So what did you think of those?
Did you have a problem with any of them? Well, they said largely what was already the case for the industry. Australia is a little bit different to the US. And so if you see a lot of the headlines in the US and the media at the moment, many of the questions are in relation to developers of infrastructure using community resources.
In Australia, and as long as we've been building data centers for 15 years, we've always had to pay for our own substation infrastructure, transmission to connect to electricity market, and then the ability to be able to sponsor through PPAs or power purchase agreements, financial instruments, the development of new renewable energy that goes into the grid.
So the release of those guidelines was really just the government meeting or re-communicating what was already legislated and already the case in Australia for the developers of data centre and other digital infrastructure assets.
So do you think your industry has already got a social licence, do you think?
Well, in the main, the majority of things that the government talked about in those requirements were giving the public confidence that these assets that are being developed aren't taking away from community infrastructure. They're not taking energy assets away from the community. They're not using drinking water as they're built in the future.
They're using either recycled water, not accessing potable water resources. So yeah, I think that all of the key messages that the government shared for goals for the development of digital infrastructure were completely logical. The majority of them are already legislated and in place today.
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Chapter 5: How is Australia positioned in the global AI data center market?
What is it being recycled from?
Generally, the water is either recycled captured or recycled desalinated. It just depends on the region.
Captured what? You mean from sewer water?
Yeah. Okay. So Singapore have a great term for it. They quite elegantly describe it as new water. But water can be refined and recycled to different standards. New water, but it's old water. It's old water that has been recycled and it's now new water. So yeah, so it's essentially sewer mining.
We tap into the sewer, we take the waste water, we recycle and treat the waste water and then use that water to cool computers.
Do you think we'll end up moving on to desalination as well or instead?
I think it's highly likely that as the technology continues to evolve, every time we consider a new development, we'll use the best or most sustainable next available technology. One of the key things that has continued to happen in the industry, and this is a key benefit of artificial intelligence itself,
the production of knowledge and the access to information and the quality of digital twins, our ability to completely build an infrastructure asset in a digital model and then apply that to the physical world is allowing us to improve the sustainability outcomes, not just in our industry, but in all industries.
The fact that you can build digital twins for almost every industry today to improve efficiency and sustainability outcomes will drive new developments for us to improve the way we run our business.
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Chapter 6: What role does water usage play in data center operations?
The consumer gets the benefit of using the community infrastructure that we have to build, whether it's sewer, recycled water, or more electricity infrastructure. And then we obviously pay a larger share as our consumption of power increases over time. So in Australia, over time, it will mean lower power costs, not higher.
Right. Okay. So the government's current target is for 82% of the grid to be renewable, I think, by 2050, right? So how does the demand for AI and the growth in data centers collide with that target, particularly since it's not going to be met? There's no way that it's going to be met. So will that mean that the use of fossil fuels, coal-fired power generation, is going to have to be extended?
And will data centers, do you think, actually mean that the planet will actually warm more than it was going to?
Well, the first principle to start with is that the technology that we are consuming and using is solving problems, whether it's in medicine, healthcare, community. I mean, every industry is benefiting today from the production of knowledge.
So when the facts change and when you think about views and goals that are set in relation to carbon targets and other things that the government would need to consider, When the community and the technology use of artificial intelligence is driving up demand, that means that the way that we support that and the scale of the infrastructure is going to change as well.
So the first point I would make is that in the ordinary course of any industrial revolution, and this is one that we're going through now, the facts change. when the facts change and we make decisions in relation to the type of energy.
I'm trying to understand exactly what you're saying there. I mean, are you saying that because it's going to be great with AI, it doesn't matter so much if the planet gets too hot?
I think the point, Alan, that I'm trying to make is that When we have new technology, we're solving problems that we couldn't solve before. So there are trade-offs in any modern economy. We'll solve health problems or challenges that hadn't been solved historically. We'll develop new energy technologies that will use power and water more efficiently as we grow the scale of AI infrastructure.
I think there are trade-offs in any modern economy. The airline industry, ports, roads, rail, transport infrastructure, they all have been through these moments in history. And digital infrastructure is going through that transition right now.
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Chapter 7: How does data center expansion affect electricity demand?
Yeah, but that's miles off. We've actually got AI right now and Mythos is kind of there, ready to go.
Yeah, I think it's a legitimate concern. There's no question that as the technology improves, so too... And it's not only the technology capability, but the social engineering capability. I'm not sure how many emails you receive a day from people telling you they've found the next best investment opportunity and you should send them your bank details, Alan. But that type of...
attack, which are driven by social engineering, not just the technology, are getting better because the quality of the writing skills, the calls that you get from people to your mobile phone, the bot farms, the phone farms, they're all improving in technology. So the downside to technology advancement is that the criminal aspects of the industry improve at the same time as the positive ones.
Yeah, what I'm getting is emails from people saying that they're getting emails from me inviting them to invest in me.
I see videos of you recommending things online all the time that you're probably not endorsing.
Absolutely not.
You need to be chasing them and getting your fair share of payment for endorsing their illegal products, Alan.
I'm trying to get them taken down, but the trouble is they're just popping up like they're all over the place. It's incredible. No, but this is a real, this is such a problem. I mean, there's actually videos of me that are clearly made by AI that are inviting people to give them money.
And some people write to me, some people write to me and say they did and they've given, they've lost all this money.
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Chapter 8: What are the implications of AI on job displacement?
and we could go back to the recording studio and do this together. You wouldn't be able to put this on iView and have it up in a day. You wouldn't be able to share all of the content with the editorial team. You wouldn't be able to have large-scale distribution through the ABC to make your podcasts access a larger audience and share the knowledge and guests that you're bringing onto the program.
So I think in your own sense... I would say to you, if you stopped using this technology, you personally would stop contributing to the development of more digital infrastructure. Are you prepared to do that?
Well, okay. Let me ask you, if somebody gave you a pill and said, this has got a 25% chance of killing you, would you swallow it? Well, what's the upside? Whatever the upside is, whatever it might be, it might be that it's going to make you incredibly intelligent, but 25% chance you die, would you do it?
Yeah, I don't know that the framing makes sense. Oh, okay, righto. I'll go back to my point. My point is that you made the statement that maybe we don't need these buildings and we shouldn't use this infrastructure. You are personally using it. The ABC are using it. All of that knowledge and content gets distributed.
You can do more work today and create more content and distribute it more widely to your listeners and to educate people than we could at any other point in time in history. And this technology will continue to improve. You won't even need a producer to review the content. AI will have already packaged it up and be ready for you to ship.
So the improvements in the tech just for you personally and for platforms like the ABC means more product, better quality, and more distribution and access to consumers. At the same time, the downside issues exist, and we're just going to have to manage them like we have at any other point in time.
Okay. What about the thing about displacing workers? Do you think that the massive investment that, you know, obviously you're undertaking and others are taking will be paid for by purely by productivity gains of existing, of the existing workforce, or will it have to be also partly paid for by the reduction of the workforce?
This is probably one of the biggest topics right now that people are asking. There's a lot of fear and anxiety, certainly about AI, job loss, what does it mean for me? And I think the first thing is there won't be an immediate displacement of roles. AI isn't going to replace you tomorrow.
What AI will do, certainly, and we're doing this in our company, and I know many other CEOs I talk to are adopting large language models in order to improve the quality of their customer engagements, to reduce tasks that would have been done, or speed up the time it takes to produce information, to be able to just do more from a productivity standpoint.
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