APLD's AI Data Center Play Sparks 94% Surge—Is This the Next Big Infrastructure Play?

The recent partnership between Applied Digital (APLD) and CoreWeave, a NVIDIA-backed AI cloud provider, has sent shockwaves through the market. After announcing a $7 billion, 15-year data center lease on June 2, 2025, APLD's stock surged 94% over the following week, driven by a cocktail of short squeeze dynamics, institutional skepticism, and retail investor euphoria. Let's dissect the catalysts and why this could be a defining moment for the AI infrastructure sector.

The $7B Revenue Engine: Why This Deal Matters

The core of APLD's surge is its 250MW data center lease to CoreWeave, a firm with 250,000 GPUs and $4 billion in prior OpenAI contracts. The 15-year deal guarantees $7 billion in revenue, with fixed annual escalators—locking in predictable cash flows even as project costs rise. This is a game-changer for APLD, which has struggled with cryptocurrency mining's volatility. The partnership also includes an option for an additional 150MW, a lever that could double revenue potential if exercised.

The deal's strategic value is clear: CoreWeave's AI infrastructure needs align with APLD's 400MW North Dakota campus, which offers low-cost energy, scalable density, and NVIDIA-optimized compute environments. This isn't just a rental agreement—it's a strategic alliance positioning APLD as a critical supplier to hyperscalers like OpenAI and Meta.

Short Squeeze Dynamics: 27.8% Shorts on the Hook

With 27.8% of shares sold short, APLD is a prime candidate for a short squeeze. Shorts are betting against a company with negative EPS ($1.46 TTM), but the CoreWeave deal transforms APLD's risk profile. As shares rally, short sellers face a double whammy: rising prices force margin calls, while the company's $7B revenue visibility undermines bearish narratives.

Retail Fervor vs. Wall Street Skepticism

While retail investors are giddy, Wall Street remains cautious. The average consensus price target is just $9, far below APLD's recent $13.25 peak. Analysts cite risks like execution delays or overvaluation, but they're missing the momentum:

• Stocktwits sentiment is extremely bullish, with retail traders hyping APLD's pivot to AI infrastructure.
• Call options are flying, with 238 million shares traded on June 2—7x the daily average—showing institutional and retail bets on further upside.
• Beta of 5.87: APLD's extreme volatility means even small catalysts (e.g., CoreWeave's 5.5% stake disclosure) can amplify swings.

The Coming Volatility Drivers

Two upcoming catalysts could push APLD even higher—or crash it:

1. Lockup Expiry: Insiders and investors holding restricted shares will soon be able to sell. If the stock has stabilized above $12, this could unleash a relief rally as fear of dumping fades. Conversely, a weak lockup expiry could spark panic.

2. The 150MW Option: If CoreWeave exercises its right to expand capacity, it would signal strong AI demand and validate APLD's business model. This could trigger a second leg up, with the stock approaching B. Riley's $15 price target.

Investment Thesis: Buy the Dip, but Beware the Risks

APLD is a high-risk, high-reward bet, but the AI infrastructure boom is real. With hyperscalers like Meta and Microsoft racing to build GPU farms, APLD's data centers are strategic assets. Here's how to play it:

• Buy on dips below $10, targeting the $15 price target. Use limit orders to capitalize on short-covering rallies.
• Avoid chasing above $13 unless the 150MW option is exercised.
• Monitor lockup expiry dates—if shares drop to $9, it's a buy-the-rumor, sell-the-news scenario.

Conclusion: APLD's Time to Shine

The 94% surge isn't just noise—it's a market recognizing APLD's pivot to AI infrastructure. While risks abound, the $7B revenue stream, short squeeze dynamics, and option exercisability make this a must-watch name. For aggressive investors, now is the time to act before Wall Street catches up.

Gary's Bottom Line: APLD is a rollercoaster ride, but the destination—$15+—is worth the bumps. Ride the AI wave, but buckle up.