OpenAI, NEXTDC Plan 550MW Sovereign AI Campus in Sydney

AI-generated Image for Illustration Only (Credit: Jacky Lee)

OpenAI has signed a memorandum of understanding with Australian data centre operator NEXTDC to collaborate on planning, development and operation of a hyperscale AI campus and large scale GPU supercluster at NEXTDC’s S7 site in Eastern Creek, western Sydney, positioning the project as “sovereign AI infrastructure” designed for onshore processing.

Deal Scope and Timeline

The arrangement sits under OpenAI for Australia, part of OpenAI’s OpenAI for Countries program, with OpenAI saying it intends to be an initial offtaker with an option to scale over time. NEXTDC said the first phase is expected to be delivered in the second half of calendar 2027, subject to securing necessary approvals.

Reuters reported the S7 site has a potential capacity of 550 megawatts and was purchased by NEXTDC last year for nearly A$353 million.

What “Sovereign AI Infrastructure” Means in Practice

NEXTDC said the campus is intended to provide “secure, sovereign infrastructure” for sensitive and mission critical workloads across sectors including government and defence, and that it is engineered with security, resilience and operational standards aligned to Australia’s SOCI framework.

OpenAI said the goal is to provide sovereign compute capacity needed to support sensitive and mission critical workloads across government, enterprise, research and national infrastructure.

Cooling and Water Use

NEXTDC said the S7 site will incorporate closed loop, high density liquid cooling for ultra high density GPU clusters, and that these systems “will not require ongoing potable drinking water” for cooling operations.

The National AI Plan

The deal comes as Australia rolls out its National AI Plan, which Reuters reported will focus on luring investment in advanced data centres and building AI skills, while relying on existing legal and regulatory frameworks rather than introducing a dedicated AI law.

Investor Response and Capex Push

NEXTDC shares rose as much as 10.9% on the day of the announcement, making it the top gainer on the benchmark index, according to Reuters.

Separately, NEXTDC said it increased FY26 capital expenditure guidance by A$400 million to A$2.2 billion to A$2.4 billion as it accelerates inventory expansion for new customer contracts, a move Reuters also referenced in its report on the OpenAI MoU.

How It Compares with Other “Sovereign” and in Country Moves

The Sydney project lands amid a wider push to localise AI compute and controls. Amazon has said it plans to invest A$20 billion in Australia’s data centre infrastructure from 2025 to 2029, with Reuters describing it as Amazon’s largest technology investment in the country.

Google is also pursuing Australian based AI infrastructure in a different form factor, with Reuters reporting plans for an AI data centre on Christmas Island following a cloud services deal with Australia’s Department of Defence.

Some rivals are tackling sovereignty at the service layer rather than via a new hyperscale campus: Microsoft said it will offer customers in Australia the option for Microsoft 365 Copilot interactions to be processed in country by the end of 2025.

Meanwhile, Harbor Solutions and Zadara have launched what they describe as a sovereign AI cloud platform in Australia designed around data residency and compliance expectations, showing how “sovereign AI” is being productised for organisations that may not need hyperscale build outs.

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Source: OpenAI, ASX Release, Reuters, Microsoft, CRN

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