Applied Digital Shares Advance Amid Robust High-Performance Computing Demand

Applied Digital Shares Advance Amid Robust High-Performance Computing Demand

Applied Digital Corp. (NASDAQ:APLD) shares experienced a significant weekly advance, rising over 34%, as market participants responded to burgeoning demand within the high-performance computing (HPC) sector and a substantial, expanded lease agreement with CoreWeave. The company's stock increased by 34.48% week-on-week, reflecting a pronounced bullish sentiment surrounding its strategic pivot towards AI infrastructure.

The Event in Detail

This notable stock performance for Applied Digital follows the finalization of an expanded lease agreement with CoreWeave, a specialist in GPU-as-a-service. This agreement could deliver Applied Digital as much as $11 billion in revenues over three long-term leases, covering 400 MW of critical IT capacity. These facilities are situated at Applied Digital's purpose-built Polaris Forge 1 Campus in Ellendale, North Dakota. The capacity rollout is phased, with 100 MW expected to be service-ready by Q4 2025, a further 150 MW by mid-2026, and the final 150 MW coming online in 2027.

The broader market context saw CoreWeave CEO Mike Intrator state in a recent interview that AI companies "cannot get enough compute," a sentiment echoed by CoreWeave CFO Nitin Agrawal. This highlighted the critical shortage of computing capacity driving investment into the HPC sector. Further reinforcing this trend, Nebius Group recently secured an $18 billion cloud computing deal with Microsoft Corp., signaling continued large-scale investments in AI infrastructure providers.

Analysis of Market Reaction

The market's positive reaction to Applied Digital is primarily driven by the tangible evidence of robust and sustained demand for HPC services, particularly those underpinning artificial intelligence workloads. The CoreWeave contract, with its significant revenue potential and long-term nature, validates Applied Digital's strategic transformation from a Bitcoin mining-focused entity to a dedicated AI-optimized data center infrastructure provider. This shift offers investors increased revenue visibility and positions the company directly within the rapidly expanding AI infrastructure market.

Financially, while Applied Digital reported $144.2 million in fiscal 2025 revenues and a loss of 80 cents per share, the future revenue streams from the CoreWeave deal are substantial. The company has proactively raised significant capital, including $874.7 million for the Ellendale expansion, which included a $160 million private placement backed by NVIDIA and a $450 million convertible note. This aggressive financing strategy underscores the capital intensity required to meet the burgeoning demand.

Broader Context and Implications

The AI infrastructure market is projected to grow substantially, with some analysts forecasting it could reach $3-4 trillion by 2030. Companies like Applied Digital, providing the foundational computing power, are critical beneficiaries of this expansion. The involvement of major players like NVIDIA, which holds a stake in CoreWeave and backed Applied Digital's financing, further emphasizes the strategic importance of these infrastructure partnerships.

While NVIDIA currently dominates the AI GPU market, the competitive landscape is intensifying. Companies such as AMD and Intel are increasing their efforts in HPC and AI chips, and major cloud providers are developing proprietary solutions. However, the ecosystem built around NVIDIA's hardware and software, to which CoreWeave is closely tied, maintains a significant advantage. Applied Digital's focus on purpose-built campuses capable of handling intensive AI workloads, alongside leveraging cost efficiencies from regional climates, positions it as a key facilitator in this ecosystem.

Expert Commentary

Industry leaders and analysts have consistently pointed to the accelerating demand for computing power. CoreWeave CEO Mike Intrator's assertion that "'AI companies cannot get enough compute'" encapsulates the current market dynamic, suggesting a supply-constrained environment that benefits infrastructure providers. This perspective is reinforced by analyst firms such as BWS Financial, which raised its price target for Nebius Group (NBIS) to $130 following its Microsoft deal, highlighting strong investor confidence in companies providing AI cloud infrastructure.

Looking Ahead

The outlook for companies in the HPC and AI infrastructure sector remains positive, driven by the unabated demand for AI capabilities. Applied Digital aims to scale its Polaris Forge 1 campus up to 1 GW of potential power capacity and is reportedly in discussions with other hyperscale clients, indicating a strong pipeline for future growth. However, key factors to monitor include the execution risks associated with large-scale data center buildouts, such as securing power and managing construction timelines and budgets. Additionally, Applied Digital's significant customer concentration with CoreWeave represents a potential risk, as does the complexity introduced by its capital structure, including warrant grants and convertible debt that could lead to dilution. The environmental impact and energy consumption of these rapidly expanding data centers will also remain a pertinent consideration for the sector as it matures.