AI Infrastructure Investment Boom: Risks for Applied Digital
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 6 days ago
0mins
Should l Buy APLD?
Source: Fool
- Debt Surge Risk: Applied Digital's debt skyrocketed from $44 million in Q1 2024 to $2.6 billion today, with a debt-to-equity ratio exceeding 125%, indicating that while the company is leveraging debt for growth, it faces significant financial risks, especially as future revenue heavily relies on a single client.
- Customer Concentration Risk: The company is banking on $16 billion in future lease revenue primarily from two companies, with $11 billion from CoreWeave, another high-growth firm taking on substantial debt; if CoreWeave fails to meet its obligations, it could lead to catastrophic consequences for Applied Digital.
- Construction Timeline Pressure: Applied Digital must meet its construction deadlines or risk losing its leases, as CoreWeave can walk away penalty-free if Applied Digital falls behind schedule, adding extra pressure in the complex data center construction process and increasing investment uncertainty.
- Investment Risk Assessment: While there is significant upside potential if everything goes perfectly, the high levels of debt accrued by Applied Digital to compete raise the risk profile for investors, particularly in the current economic climate, leading to a cautious outlook on its future growth.
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Analyst Views on APLD
Wall Street analysts forecast APLD stock price to rise
11 Analyst Rating
11 Buy
0 Hold
0 Sell
Strong Buy
Current: 36.170
Low
36.00
Averages
49.18
High
99.00
Current: 36.170
Low
36.00
Averages
49.18
High
99.00
About APLD
Applied Digital Corporation is a designer, builder, and operator of sustainably engineered data centers and colocation services for artificial intelligence, cloud, networking, and blockchain workloads. The Company’s segments include data center hosting (Data Center Hosting Business) and high-performance compute hosting (HPC Hosting Business). The Data Center Hosting Business operates data centers to provide energized space to crypto mining customers. Customer-owned hardware is installed in its facilities, and the Company provides operational and maintenance services for a fixed fee. Its facilities include a 106 megawatt (MW) facility in Jamestown and a 180 MW facility in Ellendale, North Dakota. The HPC Hosting Business designs, builds, and operates data centers which are designed to support high-compute applications using advanced technologies and infrastructures to provide services to customers. Its HPC data center is located at its Polaris Forge 1 campus with 100 MW capacity.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Applied Digital's Successful Pivot: Applied Digital has shifted from crypto-mining to AI infrastructure, securing a $5 billion long-term contract over 15 years, and despite currently being unprofitable, it reported a 250% year-over-year sales increase in Q2 2026, indicating strong market demand and positioning for future growth.
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- Industry Outlook: Analysts forecast a 61% revenue growth for Applied Digital in fiscal year 2026 and 55% in fiscal year 2027, indicating robust demand for AI computing power, although the investment carries higher risks, it may outperform the market in the long run.
See More
Applied Digital Expands Data Centers in North and South Dakota
- Stock Surge: Applied Digital's stock has surged 50% in 2026 and nearly 400% since early 2025, reflecting strong investor confidence in its future growth despite currently lacking profitability.
- Data Center Expansion: The company is constructing data centers in North and South Dakota, with 700 megawatts already under construction and another 4.3 gigawatts in development, significantly enhancing its market share and revenue potential.
- Energy Advantage: By locating in areas with excess energy capacity, the company not only reduces operational costs but also benefits from the northern climate, which facilitates more efficient cooling of its systems.
- Market Valuation: Despite a high price-to-sales ratio of 32, indicating strong market expectations for future growth, the lack of profitability and clear earnings projections necessitates cautious evaluation of its long-term investment value.
See More
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- Debt Surge Risk: Applied Digital's debt skyrocketed from $44 million in Q1 2024 to $2.6 billion today, with a debt-to-equity ratio exceeding 125%, indicating that while the company is leveraging debt for growth, it faces significant financial risks, especially as future revenue heavily relies on a single client.
- Customer Concentration Risk: The company is banking on $16 billion in future lease revenue primarily from two companies, with $11 billion from CoreWeave, another high-growth firm taking on substantial debt; if CoreWeave fails to meet its obligations, it could lead to catastrophic consequences for Applied Digital.
- Construction Timeline Pressure: Applied Digital must meet its construction deadlines or risk losing its leases, as CoreWeave can walk away penalty-free if Applied Digital falls behind schedule, adding extra pressure in the complex data center construction process and increasing investment uncertainty.
- Investment Risk Assessment: While there is significant upside potential if everything goes perfectly, the high levels of debt accrued by Applied Digital to compete raise the risk profile for investors, particularly in the current economic climate, leading to a cautious outlook on its future growth.
See More
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- High Customer Dependency: Of the projected $16 billion in future lease revenue, $11 billion comes from CoreWeave, meaning that any failure by CoreWeave to meet obligations could have catastrophic consequences for Applied Digital, amplifying investment risks.
- Construction Delay Concerns: The company's construction timeline is under pressure, and if it fails to meet deadlines, CoreWeave can walk away from leases penalty-free, creating uncertainty that undermines investor confidence.
- Market Outlook and Risks: While McKinsey forecasts $7 trillion in data center investments by 2030, Applied Digital's high debt levels and reliance on a single customer create significant uncertainties regarding its future in this burgeoning market.
See More
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- Spending Plans Overview: Alphabet plans to increase its AI spending from $91 billion in 2025 to $180 billion by 2026, while Microsoft reported $37.5 billion in Q2 2023, up from $34.9 billion in Q1, and Amazon aims to raise its spending to $200 billion in 2026, indicating a strong commitment to AI investments.
- TSMC's Market Outlook: Taiwan Semiconductor Manufacturing Company (TSMC) expects its capital expenditures to rise from $41 billion in 2025 to $54 billion, with management highlighting increased capacity to meet demand during the Q4 earnings call, leading to positive market sentiment regarding its potential benefits from the AI spending surge.
- Nvidia's Growth Potential: As a leading GPU provider, Nvidia's cloud products are sold out, and it anticipates AI spending could reach $3 to $4 trillion over the next decade, with management asserting that the company is still in the early stages of AI development and will continue to launch more powerful products to maintain its competitive edge.
- Applied Digital's Successful Pivot: Applied Digital has shifted from crypto-mining to AI infrastructure, securing a $5 billion long-term contract over 15 years, and despite currently being unprofitable, it reported a 250% year-over-year sales increase in Q2 2026, indicating strong market demand and positioning for future growth.
See More
GoDaddy's Stock Buybacks and Growth Outlook
- Consistent Profitability: GoDaddy has achieved non-GAAP profitability every year since 2017, with projected revenue of around $5 billion for 2025, reflecting its stability and resilience in a competitive tech landscape.
- Market Growth Potential: Global website registrations reached 386.9 million in Q4 2025, with the web hosting industry expected to grow at an average annual rate of over 23% to $356 billion, positioning GoDaddy to benefit significantly from this expansion.
- AI-Driven Innovation: GoDaddy's recent update to its generative AI site-building platform, Airo, has driven a 10% year-over-year increase in average revenue per user (ARPU), likely enhancing the company's high-margin revenue and cash flow.
- Stock Buyback Strategy: In the first three quarters of 2025, GoDaddy repurchased $1.4 billion worth of 137 million shares, bringing its total buyback to $5.2 billion over four years, which has propelled per-share profit growth and reflects the company's confidence in its value.
See More
Applied Digital Stock Soars Amid Market Potential
- Stock Surge: Applied Digital's stock has surged 50% in 2026, with a nearly 400% increase since early 2025, reflecting strong market confidence in its growth potential despite currently lacking profitability.
- Data Center Development: The company is constructing data centers in North and South Dakota, leveraging excess energy in the region to support the growing demand for AI computing, which is expected to drive future revenue growth.
- Market Valuation: With a price-to-sales ratio of 32, Applied Digital's stock reflects optimistic market expectations for growth; however, the absence of profits and clear projections introduces a degree of uncertainty for investors.
- Industry Outlook: Analysts forecast a 61% revenue growth for Applied Digital in fiscal year 2026 and 55% in fiscal year 2027, indicating robust demand for AI computing power, although the investment carries higher risks, it may outperform the market in the long run.
See More
Applied Digital Expands Data Centers in North and South Dakota
- Stock Surge: Applied Digital's stock has surged 50% in 2026 and nearly 400% since early 2025, reflecting strong investor confidence in its future growth despite currently lacking profitability.
- Data Center Expansion: The company is constructing data centers in North and South Dakota, with 700 megawatts already under construction and another 4.3 gigawatts in development, significantly enhancing its market share and revenue potential.
- Energy Advantage: By locating in areas with excess energy capacity, the company not only reduces operational costs but also benefits from the northern climate, which facilitates more efficient cooling of its systems.
- Market Valuation: Despite a high price-to-sales ratio of 32, indicating strong market expectations for future growth, the lack of profitability and clear earnings projections necessitates cautious evaluation of its long-term investment value.
See More
AI Infrastructure Investment Boom: Risks for Applied Digital
- Debt Surge Risk: Applied Digital's debt skyrocketed from $44 million in Q1 2024 to $2.6 billion today, with a debt-to-equity ratio exceeding 125%, indicating that while the company is leveraging debt for growth, it faces significant financial risks, especially as future revenue heavily relies on a single client.
- Customer Concentration Risk: The company is banking on $16 billion in future lease revenue primarily from two companies, with $11 billion from CoreWeave, another high-growth firm taking on substantial debt; if CoreWeave fails to meet its obligations, it could lead to catastrophic consequences for Applied Digital.
- Construction Timeline Pressure: Applied Digital must meet its construction deadlines or risk losing its leases, as CoreWeave can walk away penalty-free if Applied Digital falls behind schedule, adding extra pressure in the complex data center construction process and increasing investment uncertainty.
- Investment Risk Assessment: While there is significant upside potential if everything goes perfectly, the high levels of debt accrued by Applied Digital to compete raise the risk profile for investors, particularly in the current economic climate, leading to a cautious outlook on its future growth.
See More
AI Data Centers Could See $7 Trillion Investment by 2030
- Debt Surge Risk: Applied Digital's debt skyrocketed from $44 million in Q1 2024 to $2.6 billion today, with a debt-to-equity ratio exceeding 125%, indicating significant financial risk as the company pursues growth.
- High Customer Dependency: Of the projected $16 billion in future lease revenue, $11 billion comes from CoreWeave, meaning that any failure by CoreWeave to meet obligations could have catastrophic consequences for Applied Digital, amplifying investment risks.
- Construction Delay Concerns: The company's construction timeline is under pressure, and if it fails to meet deadlines, CoreWeave can walk away from leases penalty-free, creating uncertainty that undermines investor confidence.
- Market Outlook and Risks: While McKinsey forecasts $7 trillion in data center investments by 2030, Applied Digital's high debt levels and reliance on a single customer create significant uncertainties regarding its future in this burgeoning market.
See More
