Applied Digital (APLD): A High-Conviction Buy as AI Demand Fuels Data Center Infrastructure Growth

The AI revolution is reshaping the global data center landscape at an unprecedented pace. By 2025, nearly 75% of new data centers are being designed explicitly for AI workloads, signaling a seismic shift in industry priorities. As AI inference and training demands surge, the infrastructure requirements for hyperscalers are expanding exponentially, with AI projected to dominate over half of all data center workloads by 2030. This transformation is not just a technological shift but a $3 trillion investment opportunity by 2030, with $1.2 trillion allocated to real estate and $1–2 trillion to IT equipment like GPUs. In this high-stakes environment, Applied Digital (APLD) has emerged as a strategic linchpin, leveraging its AI-optimized infrastructure, geographic advantages, and financial agility to secure a commanding position in the hyperscaler market.

Strategic Positioning: Securing the AI Infrastructure Supply Chain

Applied Digital's strategic positioning is anchored in its partnerships with two of the most critical players in the AI ecosystem. The company has secured 600 megawatts of leased capacity across its Polaris Forge 1 and Polaris Forge 2 campuses in North Dakota, representing $16 billion in prospective lease revenue. CoreWeave, a leading AI cloud provider, has committed to a 15-year, 400 MW lease at Polaris Forge 1, generating $11 billion in revenue over the term. Meanwhile, an unnamed U.S.-based hyperscaler has leased 200 MW at Polaris Forge 2, projected to deliver $5 billion in lease revenue. These agreements not only lock in long-term cash flows but also position APLD as a critical infrastructure partner for companies racing to scale AI capabilities.

The Dakotas' strategic advantages amplify APLD's value proposition. The region's cool climate reduces cooling costs, while access to low-cost energy-particularly wind and natural gas-enables efficient operation of high-density AI facilities. This is a stark contrast to traditional data center hubs like Northern Virginia, where energy costs and latency constraints are becoming increasingly prohibitive for AI workloads. By focusing on modular, AI-optimized construction, APLD can deploy facilities 50% faster than conventional providers, ensuring rapid scalability to meet surging demand.

Financial Performance: Explosive Growth and Liquidity Strength

APLD's financial results in fiscal Q2 2026 underscore its accelerating momentum. Revenue surged 250% year-over-year to $126.6 million, driven by its High-Performance Computing (HPC) Hosting Business, which contributed $85 million in revenue. The Data Center Hosting Business added $41.6 million, reflecting a 15% year-over-year increase. These figures far exceeded analyst expectations and highlight the company's ability to monetize its AI-focused infrastructure.

The financial strength of APLD is further reinforced by its liquidity position. The company holds $2.3 billion in cash, cash equivalents, and restricted cash, supported by a $2.35 billion senior secured private notes offering and a $5 billion preferred equity financing facility with Macquarie Asset Management. This capital structure minimizes reliance on volatile public markets while funding its aggressive expansion. Notably, APLD's decision to spin off its cloud business into a standalone entity, ChronoScale, enhances strategic flexibility and allows the core infrastructure business to focus on its hyperscaler partnerships.

Competitive Advantages: Modular Design and Market Timing

APLD's modular construction approach is a key differentiator in a market where speed and adaptability are paramount. Traditional data centers require 18–24 months to build, but APLD's AI-optimized facilities can be deployed in under 12 months. This agility is critical as hyperscalers shift from centralized AI training to distributed inference models, necessitating regional hubs and edge deployments to reduce latency. APLD's North Dakota campuses are ideally positioned to serve as regional AI hubs, catering to both U.S. and global clients.

The company's market timing is equally compelling. With AI workloads expected to account for over 50% of data center demand by 2030, APLD's Polaris Forge campuses are transitioning from construction to full operational scale by 2026. This aligns perfectly with the inflection point in hyperscaler spending, as companies like CoreWeave and the unnamed U.S. hyperscaler ramp up their AI infrastructure.

Investment Thesis: APLD as a High-Conviction Buy

Applied Digital's strategic positioning, financial performance, and operational advantages make it a high-conviction buy in the AI-driven data center boom. The company is not merely capitalizing on a trend but is actively shaping the infrastructure that will underpin the next decade of AI innovation. With $16 billion in secured lease revenue, a 250% revenue growth rate, and access to $5 billion in preferred equity financing, APLD is insulated from near-term market volatility while scaling at an extraordinary pace.

For investors, the case is clear: APLD is a critical beneficiary of the $3 trillion AI infrastructure investment wave. Its partnerships with hyperscalers, geographic advantages, and modular construction model position it to outperform peers as AI demand accelerates. In a market where early movers gain lasting advantages, Applied Digital is not just participating in the AI revolution-it is building the rails on which it will run.