Morrison's Paul Newfield sees big opportunity for New Zealand from 'massive overflow opportunity of the AI industry needing to move out of the US'

New Zealand has the potential to skim off a significant chunk of data centre capacity from the United States but hasn't yet made a strong enough case or pushed hard enough, says Paul Newfield, partner and CEO at infrastructure investor Morrison.

Newfield made the comments while speaking at the Institute of Finance Professionals New Zealand (INFINZ) annual conference in Auckland on Tuesday. Morrison has more than US$30 billion of assets under management including via Infratil and including data centres.

He acknowledged data centres aren't universally popular, saying protests against them are occurring for "some really good reasons." That's due to concerns "they're going to suck up all the electricity and put your power bills up, " use all the water, or be "built next to your house and shake your house."

"Just to be clear, data centres don't need to do any of those things, right? And so [with] our CDC [data centre] business we are going out and saying we want regulation. We want regulation to set the floor, and we want to compete on how you meet it," Newfield said.

"You can actually fill the data centre up with water once and keep reusing that water for the next 30 years. It's more expensive, but that's just a design choice. Of course we should do that. And of course data centres should be a spur for new renewables to be built. They shouldn't be competing for existing supply, putting prices up."

He suggested, however, that there's another key reason people are scared of data centres, which is because "they're the only physical manifestation" of artificial intelligence (AI). 

"And so a lot of what you're seeing in these protests is people saying, 'I'm scared of AI and what it means for us'," said Newfield.

The political left and right in the United States can only really agree on one thing at the moment, Newfield suggested, citing comments from Democrat Senator Bernie Sanders and MAGA Republican Senator Josh Hawley; "which is that they hate data centres and they hate AI."

"That means social license is becoming a concern."

"I actually believe the US is going to hit a constraint very soon, probably straight after the mid-terms [November mid-term elections], which will be a lack of electricity and a lack of social license."

"And that will create this massive overflow opportunity of the AI industry needing to move out of the US. So where will it move?"

"There is a simple recipe if you want to be the place it moves to. You want abundant, cheap renewable energy. You want AI-capable sovereign data centre capabilities. So data centers that are actually owned locally, regulated locally."

"[And] you want to be part of Five Eyes. Because particularly, for example, why are Anthropic really interested in this part of the world? They want to demonstrate back to the Pentagon that they can be a trusted partner for Five Eyes governments so that they then get embraced a bit more at home. You need regional geopolitical stability. That really showed through earlier this year when things started kicking off in Iran and missiles were being fired at data centres in the UAE," Newfield said.

"Our data centre business just started getting a lot of inbound interest from people saying, 'actually, you're in a really safe part of the world.' You need forward-thinking regulation, so regulation that doesn't wait for all the harm to happen, that actually says what will make this good for society and how do we make this a win-win for everyone."

"And you need domestic political stability. So, um, can anyone tell what countries I'm describing there? Australia, unfortunately. I know the flags are quite similar, but right now, New Zealand should be eating the US's lunch, and Australia will. You know, Anthropic are coming down saying 'we expect Australia to be our biggest global centre for AI development, after the US, because you have all of those characteristics'," said Newfield.

"Now, actually, New Zealand is naturally way more advantaged than Australia. We just haven't yet made the case strong enough, and we haven't pushed fast enough. This is something we can't afford just to be a fast follower [in]."

"To give you a sense, there's some really good BCG work done this year that said if New Zealand captured, I think it was 2% or 3% of the just Asia-Pacific AI data centre market, it would be a $60 billion opportunity for New Zealand, maybe $70 billion. It was 600 megawatts of capacity they thought it'd get," said Newfield. 

Citing what he described as a "Lloydism," being something Morrison's late founder Lloyd Morrison might've said, Newfield said; "Excuse my language, but If I'd shown that as a target to Lloyd, he would have said, 'that's f**king pathetic. Like, why would we think we should be targeting 2% or 3% of this given our natural advantages?"

"And to give you a sense, that 600 megawatts that they were talking about in the next 10 years, our data centre business in Australia earlier this year signed one contract that was 550 megawatts."

"There's no reason why this can't be [a] hundreds of billions of dollars of GDP opportunity for New Zealand if we get that recipe right," said Newfield.

He noted that in Trump's America a business building renewable energy gets 50% of its capital expenditure covered by tax credits.

"In New Zealand, you get none. That is not because Trump loves renewables, it's because the US needs its AI industry to boom. So they are subsidising renewables, but they can't keep up. So where will that demand go? It will go to countries that have got available energy and are geopolitically safe."