Applied Digital’s $11B HPC Hosting Deal and Its Implications for AI-Driven Infrastructure Stocks

In the race to power the AI revolution, infrastructure is king. Applied Digital’s recent $11 billion high-performance computing (HPC) hosting deal with CoreWeave—a “Hyperscaler” in AI—has thrust the company into the spotlight. This agreement, spanning 400MW of critical IT capacity at its Polaris Forge 1 Campus in North Dakota, underscores a strategic pivot toward AI-driven infrastructure. But how does this deal reshape Applied Digital’s valuation and position it within a sector poised for explosive growth?

The Strategic Logic of the $11B Deal

Applied Digital’s partnership with CoreWeave is more than a revenue play—it’s a masterclass in leveraging geography, energy, and timing. The Polaris Forge 1 Campus, designed to scale to 1 gigawatt, exploits North Dakota’s cool climate to reduce cooling costs and its access to renewable energy to cut operational expenses. According to a report by the company, these efficiencies could save $2.7 billion over 30 years [1].

The phased rollout of the data centers—100MW by Q4 2025, 150MW by mid-2026, and another 150MW by 2027—aligns with CoreWeave’s aggressive AI expansion. By locking in 15-year leases, Applied Digital secures predictable cash flows in a sector where demand for HPC is outpacing supply. As stated by Bloomberg, the global AI hosting market is projected to grow at a compound annual rate of 36.1% for AI inference alone by 2030 [2]. This deal positions Applied Digital as a critical node in the AI infrastructure supply chain.

Valuation in a High-Growth Sector

Despite its transformative deal, Applied Digital trades at a discount to its peers. The company’s enterprise value of $4.9 billion is 17 times its forward operating profit [3], a metric that appears low given its $11 billion in contracted revenue. For context, the broader hosting sector commands EBITDA multiples ranging from 7.5x to 11.6x, depending on profitability [4]. Applied Digital’s Q4 2025 Adjusted EBITDA of $1 million [5]—while modest—suggests untapped potential.

The AI hosting sector’s valuation premiums are even more striking. AI startups, for instance, trade at median revenue multiples of 25.8x in 2025 [6], far exceeding traditional tech valuations. Applied Digital’s P/B ratio of 4.95 [7] hints at a disconnect between its book value and its long-term asset base, which includes land, power infrastructure, and long-term leases. This discrepancy could narrow as the campus ramps up and the company transitions from capital-intensive construction to stable cash flows.

Undervaluation and Strategic Repositioning

Applied Digital’s current financials—$26.6 million in Q4 net losses and $688 million in debt—mask its strategic advantages. The company’s focus on long-term, fixed-price leases insulates it from short-term volatility in energy or hardware costs. Meanwhile, its partnership with CoreWeave, a rising star in AI infrastructure, offers a clear path to scaling.

Comparisons to undervalued AI peers like TSMC (forward P/E of 24.3) and Yiren Digital (P/E of 2.8) highlight Applied Digital’s unique position. While TSMC benefits from its dominance in chip manufacturing, Applied Digital’s value lies in its physical infrastructure. As AI workloads shift toward distributed, energy-efficient hubs, Applied Digital’s North Dakota campus could become a template for future data centers.

Risks and Considerations

Applied Digital’s path to profitability isn’t without hurdles. Its heavy debt load and ongoing losses raise questions about liquidity. Additionally, the AI hosting sector’s rapid growth could attract new entrants, compressing margins. However, the company’s first-mover advantage in North Dakota—where land and energy costs are low—provides a moat.

For investors, the key question is whether Applied Digital can execute its capital-intensive plans without derailing its balance sheet. The recent $7 billion in contracted revenue from CoreWeave offers a buffer, but the company must manage its debt and reinvest in infrastructure to sustain growth.

Conclusion

Applied Digital’s $11 billion HPC deal is a strategic masterstroke in a sector primed for disruption. By anchoring its valuation to long-term leases and renewable energy, the company is repositioning itself as a critical player in the AI infrastructure arms race. While its current financials are unimpressive, the projected $500 million in annual revenue from the CoreWeave deal suggests a path to profitability. For investors willing to bet on the future of AI, Applied Digital’s undervaluation—and its ability to scale—could offer compelling upside.

Source:
[1] Press Releases [https://ir.applieddigital.com/news-events/press-releases/detail/128/applied-digital-finalizes-additional-150mw-lease-with]
[2] AI Inference Market Size, Share & Growth, 2025 To 2030 [https://www.marketsandmarkets.com/Market-Reports/ai-inference-market-189921964.html]
[3] Poised for Explosive Growth: 2 AI Stocks That Could Surge ... [https://www.mitrade.com/insights/news/live-news/article-8-1088434-20250902]
[4] Valuation & EBITDA Multiples for Tech Companies: 2025 ... [https://firstpagesage.com/business/valuation-ebitda-multiples-for-tech-companies/]
[5] Applied Digital Reports Fiscal Fourth Quarter and Full Year 2025 Results [https://ir.applieddigital.com/news-events/press-releases/detail/126/applied-digital-reports-fiscal-fourth-quarter-and-full-year]
[6] AI Valuation Multiples 2025 [https://aventis-advisors.com/ai-valuation-multiples/]
[7] Buy Applied Digital Corporation stock | $APLD Share Price [https://lightyear.com/en/stock/APLD:NASDAQ]