Applied Digital's Gigawatt Gambit: Navigating the Risks of a Renewable Energy Power Play

The global gigawatt race is accelerating, driven by a confluence of decarbonization mandates, technological innovation, and the insatiable demand for energy to power artificial intelligence and high-performance computing. Applied Digital, a relative newcomer to the renewable energy arena, has positioned itself at the intersection of this race, leveraging partnerships, capital infusions, and digital infrastructure to scale its footprint. Yet, as the company bets heavily on renewable energy deployment, investors must scrutinize the strategic and financial risks embedded in its aggressive strategy.

Strategic Positioning: Partnerships and Projects

Applied Digital's renewable energy ambitions are anchored in its pivot from cryptocurrency mining to AI infrastructure, a shift that has unlocked access to low-cost, renewable energy sources. The company has secured a $5 billion investment from Macquarie Asset Management to develop its Ellendale HPC Campus, which will provide over 2 gigawatts of data center capacityMacquarie Asset Management invests in Applied Digital and Aligned Data Centers^[3]. Additionally, it has partnered with ABB to deploy 400 MW of greenfield data centers in North Dakota, utilizing advanced medium-voltage uninterruptible power supply (UPS) technology to meet the energy demands of AI workloadsABB and Applied Digital accelerate AI-ready data centers^[4]. These projects are further bolstered by a long-term retail electric service agreement with TerraForm Power, ensuring renewable energy supply for its 200-MW facility in TexasApplied Digital's Long-Term Supply Agreement with TerraForm Power Bolsters Next-Generation Datacenter^[5].

While these moves underscore Applied Digital's technical and financial heft, they also expose the company to a volatile landscape. The digital energy market, projected to grow from $610 billion in 2025 to $1.1 trillion by 2032 at a 8.8% CAGRDigital Energy Market Size to Hit USD 1,101.44 Bn By 2032^[2], is highly competitive. Applied Digital's market share in this segment remains opaque, but its broader technology sector presence—2.61% in Q2 2025—suggests it is a niche player compared to industry giants like Godaddy Inc., which dominates with 56.04% market shareApplied Digital Market share relative to its competitors, as of Q2 2025^[1].

Strategic Risks: Regulatory and Supply Chain Vulnerabilities

The renewable energy sector in 2025 is fraught with regulatory and geopolitical headwinds. The U.S. Inflation Reduction Act (IRA), while a tailwind for domestic clean energy production, has also introduced uncertainty through fluctuating tax credits and evolving compliance requirementsEmerging Renewable Energy Risks in 2025 | TÜV SÜD^[6]. For Applied Digital, which relies on federal incentives like the Section 45X Advanced Manufacturing Production Tax Credit to subsidize components such as solar modules and battery cellsThe State of US Clean Energy Supply Chains in 2025^[7], any policy reversal or delay could disrupt project timelines and profitability.

Supply chain risks further complicate the equation. With 58% of global solar installations and 63% of new EV purchases in 2023 originating from ChinaEmerging Renewable Energy Risks in 2025 | TÜV SÜD^[6], Applied Digital's projects are indirectly exposed to geopolitical tensions and protectionist policies. Tariff escalations and material shortages—particularly for critical minerals like lithium and rare earths—could inflate costs and delay deployments. The company's reliance on third-party suppliers for renewable energy infrastructure, such as TerraForm Power, adds another layer of vulnerability if those partners face regulatory or financial challenges.

Financial Risks: Leverage and Partnership Dependency

Applied Digital's aggressive expansion is underpinned by significant financial leverage. The $5 billion Macquarie investment, while transformative, ties the company's fate to the performance of its Ellendale Campus and future HPC projects. If demand for AI infrastructure softens or energy prices spike, the company could face liquidity constraints. Moreover, its partnerships with ABB and TerraForm Power, while strategic, create dependency on external entities for technology and energy supply. A disruption in these relationships—whether due to technical failures, pricing disputes, or regulatory scrutiny—could derail operations.

The company's broader financial profile also warrants attention. Applied Digital holds a 4.45% market share in the Cloud Computing & Data Analytics industryApplied Digital Market share relative to its competitors, as of Q2 2025^[1], but its revenue streams remain concentrated in high-margin, capital-intensive projects. This concentration increases exposure to market cycles, particularly if AI demand plateaus or shifts to alternative computing models.

Mitigating the Risks: A Path Forward

To navigate these challenges, Applied Digital must diversify its supply chains, hedge against regulatory shifts, and strengthen its balance sheet. Scenario planning—such as stress-testing projects under varying IRA policy environments—could enhance resilience. Additionally, expanding into emerging markets like India, where the Dhirubhai Ambani Giga Energy Complex is scaling solar and hydrogen productionThese are the top five energy technology trends of 2025^[8], could reduce reliance on China-dominated supply chains.

Conclusion: A High-Stakes Bet

Applied Digital's foray into the gigawatt race is a bold bet on the future of energy and computing. Its partnerships, capital investments, and technological agility position it to capitalize on the digital energy boom. However, the path to dominance is littered with risks—regulatory, geopolitical, and financial—that could undermine its ambitions. For investors, the key question is whether the company's strategic flexibility and financial discipline can outpace the turbulence of a sector in flux.