Power On: Applied Digital's First AI Data Center Goes Live

Shares of Applied Digital (NASDAQ: APLD) rose by 12.8% on Nov. 24, a significant move that caught the attention of investors in the artificial intelligence (AI) sector. This was not a rally based on hype, but a direct market reaction to a tangible achievement: the company announced that its first 100-megawatt (MW) building at the Polaris Forge 1 campus in North Dakota is officially Ready for Service (RFS).

For investors, the RFS designation is critical. It marks the moment a costly construction project transforms into a functional asset, ready for a tenant’s high-performance computers (HPC) to be installed. It is the pivotal first step toward generating long-term lease revenue. In a market desperate for AI infrastructure, this milestone served as definitive proof that Applied Digital can deliver on its ambitious promises, and investors rewarded the stock accordingly.

Why Power Is the New AI Currency

The AI revolution has created a seismic shift in the technology supply chain. For years, the primary constraint on building advanced AI was a shortage of powerful graphics processing units (GPUs).

Now that GPU production is catching up, a more fundamental bottleneck is apparent: a lack of specialized data centers.

These AI Factories are vastly different from traditional data centers. They must handle enormous power loads and dissipate the immense heat generated by thousands of chips running simultaneously.

This requires advanced liquid-cooling systems and direct access to massive amounts of grid power.

As CEO Wes Cummins confirmed on a recent earnings call, the limiting factor in AI deployment today is the lack of these purpose-built facilities.

The scale of this demand is staggering. Hyperscalers are projected to invest over $350 billion in AI infrastructure in 2025 alone. Yet, the nation faces a power shortfall for data centers exceeding 90 gigawatts. This dynamic makes Applied Digital's business model a picks and shovels play in the AI gold rush, supplying the critical infrastructure everyone needs.

Turning Power Contracts Into Billions

Applied Digital is successfully translating its access to power into enormous, long-term revenue streams. The company’s thesis is validated by a pipeline of multi-billion-dollar contracts, providing investors with a clear view of its future growth.

These key contracts underpin the company's valuation:

• Polaris Forge 1: The 400 MW campus in Ellendale is fully leased to AI hyperscaler CoreWeave. This single campus is backed by an agreement projected to generate approximately $11 billion in revenue over its 15-year term.
• Polaris Forge 2: The company has already broken ground on its next major project in Harwood, North Dakota. The initial 200 MW of this campus is pre-leased under a $5 billion agreement with an undisclosed, investment-grade U.S. hyperscaler.

These are more than speculative projects because they are pre-sold infrastructure assets. By securing long-term, binding contracts before construction is complete, Applied Digital provides investors with a level of revenue visibility and financial stability that is highly sought after.

Funding Growth, Protecting Shareholders

Building the infrastructure for the AI revolution requires billions of dollars. This often forces growing companies to issue new stock, diluting the ownership of existing shareholders. Applied Digital, however, has pursued a financial strategy designed to fund its aggressive expansion while protecting the value of its publicly traded stock.

The company recently closed a $2.35 billion senior note offering, securing a dedicated war chest to complete the construction of its contracted projects. This debt is complemented by a strategic financing partnership with Macquarie Asset Management, a major global infrastructure investor, which provides scalable, project-level equity.

For stockholders, this approach is a key advantage. By raising capital at the asset level, tied directly to the revenue-generating projects, the company can fund its buildout with minimal dilution of common stock. This structure is designed to preserve the upside potential for equity investors as the company grows.

Analyst Support vs. High Short Interest: The Setup for a Short Squeeze

Applied Digital’s successful execution has been validated by Wall Street. Following its recent announcements, the company received a wave of positive analyst actions, including price target upgrades from Needham ($41) and Craig−Hallum ($39), both of which indicate healthy upside potential.

However, this bullish outlook exists within a high-stakes environment.

The company’s aggressive, debt-fueled growth has attracted skepticism, reflected in high short interest of over 31% of its publicly traded shares.

While this indicates bearish sentiment, it also creates a potential catalyst. Each successful milestone, like the RFS announcement, puts pressure on short-sellers.

If they are forced to buy shares to close their positions, it could trigger a short squeeze—a rapid increase in Applied Digital’s stock price.

With its land, power, tenants, and capital now secured, the investment narrative for Applied Digital has shifted to one of pure execution.

The company just passed its first major test by delivering Polaris Forge 1 on time and fully leased. As additional sites go live, its model of pre-sold, revenue-generating AI infrastructure could prove increasingly attractive to investors.

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The article "Power On: Applied Digital’s First AI Data Center Goes Live" first appeared on MarketBeat.