Issue #41 | Boring Beat AI

ASX - Top 3 Winners & Losers
Deals Down Under - EQT bins Cleanaway
Global Markets - AI hits a funding wall
Other News - Aussie Politics, Sport and Culture

The ASX 200 fell 0.13% this week, snapping a three-week winning streak as a global sell-off in AI and chip stocks and a jump in oil prices hit resources. Brent crude rose above US$114 a barrel, its highest since May, which kept inflation and interest rate concerns alive around the world. The materials sector dropped almost 8% since Monday as copper and gold prices fell, while a rebound in bank stocks limited the damage. 

The week’s best performers 

Cleanaway Waste Management (ASX:CWY) +21.05%
Cleanaway Waste Management, the waste collection and recycling operator, jumped 21.05% after signing a binding takeover deal with EQT Infrastructure. It came alongside a result with underlying EBIT up 14.2% to $470.2m, and shareholders vote on the scheme by the end of February 2027. Until then, the share price will follow the odds of the deal closing. We break down the buyout in Deals Down Under below.  

Challenger (ASX:CGF) +21.02%
Another takeover move this week, this time at Challenger, the annuities provider, which rose 21.02% after TAL Daiichi Life Australia made a nonbinding offer of $11.80 a share, 17.7% above its average price over the past month. TAL Daiichi already owns 20.5%, so the board can still reject the offer or push for more. At about $11.75, the shares already price in a deal, which leaves them exposed if talks stall.

Ingenia Communities (ASX:INA) +20.20%
A week after falling 16.81%, Ingenia Communities, the senior living and land lease operator, rose 20.20% as talks with Warburg Pincus moved forward. The board said it plans to walk away from the $992.5m Peet takeover, a condition of Warburg’s $5.25 cash proposal. The offer is still nonbinding and subject to due diligence and debt funding.

This week's worst performers

NextDC (ASX:NXT) -38.89%
NextDC, the data centre operator, fell 38.89% after power delays in Melbourne pushed $140m of contracted revenue out of this financial year, and it put new developments and land purchases on hold. Customers have signed up for capacity at its M3 site, but NextDC can only bill them once the grid can supply the power, and that upgrade is now not expected until 2028. It cut its 2027 net revenue outlook to $475m to $500m from $615m to $640m, excluding the delayed contracts. Wednesday was its worst day since listing in 2010.

Zip Co (ASX:ZIP) -32.72%
A coordinated fraud attack in the US gave Zip Co, the buy now, pay later provider, its worst day on record on Friday, when it closed 29.47% lower. Fraudsters used legitimate credentials to open accounts and make purchases that were never repaid, costing $10.1m and lifting net bad debts to 1.97% of transaction volume. Cash earnings of $65.0m missed expectations by 15%, and management held its FY27 guidance.

Ora Banda Mining (ASX:OBM) -21.00%
Ora Banda Mining, the Western Australian gold miner, fell 21.00% after its September quarter report showed all-in sustaining costs of $4,214/oz, the full cost of mining and selling an ounce. That is well above its $3,400 to $3,600/oz FY27 guidance, with an extended mill shutdown and weather blamed. Guidance was maintained, which means costs have to fall sharply over the rest of the year. 

Swedish private equity giant EQT has signed a binding deal to buy Cleanaway Waste Management, Australia’s largest garbage collector, valuing it at $9.3 billion including debt. Pending shareholder, FIRB and ACCC approval, the deal will end Cleanaway’s 21 years on the ASX.

EQT had been in talks with Cleanaway since April, offering $3.13 a share in August. That was a 32.1% premium to its share price, and valued the business at 20 times its 2026 EBIT. The board had reason to take it. Cleanaway had already cut its guidance on rising fuel costs, and its full year results then missed forecasts on profit, cash flow and margins. Not every shareholder agrees: Tanarra Capital, which owns more than 4% of Cleanaway, criticised the price as too low and the sale process as uncompetitive.

For EQT, the appeal is stability. Household and commercial waste volumes barely move with the economy, and EQT reportedly owns similar waste businesses overseas that it can use to improve Cleanaway’s operations. Lenders shared that confidence, backing EQT with a $5.6 billion debt package from nearly 20 banks. EQT’s pledge to fund more than half the purchase with equity further reassured lenders.

The deal was one of $22.4 billion in takeovers announced to the ASX on Monday, alongside deals for Reliance Worldwide and FleetPartners and a bid for Challenger. Fund managers argue the market’s focus on short-term earnings has left solid companies undervalued, and patient buyers are taking advantage. That matters because households directly own 12.8% of ASX All Ordinaries shares, so every quality company taken private is one fewer that ordinary Australians can buy into.

For EQT, Cleanaway is its first major takeover of an ASX company in nearly a decade, after it walked away from AUB Group and abandoned Vocus. Its next target is Perpetual, where a fourth bid could take another name off the ASX.

Investors are starting to doubt whether the global artificial intelligence boom can keep paying for itself. AI runs on data centres that cost billions to build, and companies are finding it harder to raise that money. The Philadelphia Semiconductor Index, which tracks the chipmakers that supply those data centres, has fallen 27% from its June peak. Even US tech giant Meta is feeling the squeeze. Its shares dropped 7% after it revealed plans for a new class of shares to help fund AI spending of at least $US135 billion this year.

Borrowing has become more expensive across the board. Oil above $US100 a barrel has kept inflation high, and in Australia four rate hikes by the Reserve Bank this year have lifted the cash rate to 4.6%. AI companies are being hit hardest because they are borrowing huge sums at once to build data centres whose revenue is still years away, leaving lenders with more risk and too much AI debt to absorb. That has pushed yields on bonds issued by US data centre operator CoreWeave to 15%, a level fund managers say is approaching distressed territory. 

Australia’s AI players have hit the same wall. Firmus failed to raise money from public investors, pulling its $44 billion ASX float, which would have been the biggest since Telstra in 1997, after investors baulked at the valuation. Sydney-founded data centre operator AirTrunk then postponed its own $US1.5 billion listing in Singapore. NextDC shares fell 40% after power connection delays at its Melbourne site forced it to cut earnings guidance by more than a third. Its borrowing costs have since jumped by a third in a week. That matters well beyond NextDC: a $155 billion pipeline of Australian data centre projects depends on that kind of funding. The pain has also spread to suppliers whose revenue relies on these projects going ahead. Maas Group, which builds equipment for Firmus, and SKS Technologies, which supplies NextDC, have each lost about half their value in a fortnight.

With AI stocks now seen as high risk, fund managers are shifting into safer sectors such as insurance and defence, or holding cash until conditions settle. Demand for AI may still be strong, but the funding wall means capital will now flow only to companies with the strongest balance sheets.

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