APLD Rides on Accelerating AI Infrastructure Demand: What's Ahead?

Applied Digital APLD is benefiting from increasing demand for AI infrastructure. APLD has inked 15-year lease agreement with CoreWeave CRWV to deliver 250 megawatts of critical IT load at the Ellendale, ND, campus, now called Polaris Forge 1. In the last week of August, CoreWeave exercised its option for an additional 150 megawatts in a third building at Polaris Forge 1. The new agreement brings APLD’s total anticipated contracted lease revenues to roughly $11 billion.

APLD’s Polaris Forge 1 is purpose-built for AI and high-performance computing (HPC) and is designed to scale up to 1 gigawatt. The first 100-megawatt facility is scheduled to be operational in the fourth quarter of 2025, the second 150-megawatt facility is set to come online in mid-2026, and the third 150-megawatt facility is planned for 2027.

Polaris Forge 1 is expected to help Applied Digital offer reliable, power-dense solutions and become a leader in designing and building AI factories. AI Queries require 15 times the electricity of traditional queries and racks now exceed 50 kilowatts. However, less than 10% of facilities can support this density, which offers a significant growth opportunity for Applied Digital. 

Strong spending by hyperscalers, which is expected to be more than $350 billion, bodes well for APLD. Hyperscalers require high-capacity data centers to meet the escalating power needs of AI and GPU-driven applications. This is benefiting APLD’s prospects. The company currently operates roughly 286 megawatts of blockchain data center.

Tough Competition Hurts APLD’s AI Data Center Prospects

Applied Digital is facing competition from the likes of AI infrastructure provider Vertiv VRT and established data center operators such as Equinix EQIX.

Vertiv is benefiting from an extensive product portfolio, which spans thermal systems, liquid cooling, UPS, switchgear, busbar and modular solutions, which is noteworthy. In the trailing 12 months, organic orders grew approximately 11%. Collaborations with CoreWeave and Oklo strengthened its technology leadership, positioning Vertiv well for long-term growth in the evolving data center market. Vertiv’s partnership with NVIDIA is a plus.

Equinix has been expanding its IBX data centers globally and is gaining traction among technology companies looking for data management. The demand for high-performing data centers will escalate in the years to come with the exponential rise in data traffic. This will require enterprises to engage data-center service providers such as Equinix. Therefore, increasing the total addressable market for data centers provides an immense growth opportunity for Equinix. Management expects total revenues to rise 5-6% in 2025 over the previous year.

APLD’s Share Price Performance, Valuation & Estimates

Applied Digital shares have skyrocketed 99.7% year to date, outperforming the broader Zacks Finance sector’s return of 12.8% and the Zacks Financial-Miscellaneous Services industry’s appreciation of 5.4%.

APLD Stock’s Performance

Applied Digital stock is overvalued, with a forward 12-month price/sales of 13.24X compared with the broader sector’s 8.79X. APLD has a Value Score of F.

APLD Valuation

The Zacks Consensus Estimate for first-quarter fiscal 2026 loss is pegged at 11 cents per share, wider by a nickel over the past 30 days. Applied Digital reported a loss of 3 cents per share in the year-ago quarter.

Applied Digital Corporation Price and Consensus

 

Applied Digital Corporation price-consensus-chart | Applied Digital Corporation Quote

Applied Digital currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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