Applied Digital Corporation (APLD): Powering the AI Revolution with Undervalued Infrastructure

The artificial intelligence revolution is not just about algorithms—it's a race to secure the physical infrastructure required to power it. Applied Digital Corporation (APLD), once a general-purpose data center operator, has positioned itself at the heart of this transformation. By pivoting to high-performance computing (HPC) data centers tailored for AI workloads, APLD is addressing a critical bottleneck: the energy-intensive demands of training and deploying advanced models. Yet, its stock price has lagged behind its strategic ambitions, creating a speculative opportunity for investors willing to bet on its ability to capitalize on the AI infrastructure boom.

The Energy Equation: Why AI Demands More Than Just Megawatts

AI's hunger for power is staggering. A single training run for a large language model can consume as much energy as a small city, requiring data centers to deliver ultra-high power density, advanced cooling, and access to cheap, renewable energy. Traditional data centers, designed for less intensive workloads, often fall short. This is where APLD's strategy shines.

Take its flagship Ellendale HPC Campus in North Dakota—a 1-gigawatt facility powered by hydropower and wind energy. The campus's liquid-cooling infrastructure and modular design allow it to support power densities exceeding 100 kW per rack, far surpassing the 5–10 kW typical of legacy centers. This makes it an ideal partner for hyperscalers like CoreWeave, which signed a $7 billion 15-year lease for 250 MW of capacity.

Financial Fortitude and Strategic Partnerships

APLD's pivot has been backed by shrewd capital moves. A $5 billion partnership with Macquarie Asset Management has provided debt-free funding, reducing net debt to just $428 million while bolstering cash reserves to $314.6 million. Crucially, this structure avoids diluting ownership, as APLD retains 85% of the company. The funds are allocated to scale Ellendale's HPC capacity to 400 MW by mid-2026—a move that could solidify its position as a hyperscaler favorite.

The divestiture of its Cloud Services segment, though revenue-negative in the short term, eliminated operational complexity and potential conflicts of interest with hyperscaler clients. This sets the stage for a potential REIT conversion, which could unlock significant valuation upside. REITs, which pass 90% of earnings to shareholders and avoid corporate taxes, often trade at higher price-to-sales ratios than traditional REITs. Analysts estimate APLD's valuation could rise from its current 11.4x price-to-sales multiple to 15–20x if it transitions successfully.

Risks and Reward: Navigating the AI Infrastructure Landscape

APLD is not without risks. Execution is critical: delays in securing additional hyperscaler leases or power shortages (projected 36 GW by 2028) could disrupt growth. Meanwhile, its stock has fallen 30% from June highs, reflecting investor anxiety over near-term losses and strategic uncertainty. However, the fundamentals are compelling: revenue grew 51% year-over-year in Q3 2025, with EBITDA surging 93%.

The bull case hinges on two catalysts:
1. REIT Conversion: APLD's management has signaled intentions to pursue this, which could stabilize its stock and attract yield-seeking investors.
2. Ellendale's Expansion: Scaling to 400 MW by 2026 would solidify its role as a go-to partner for hyperscalers, just as AI workloads are expected to dominate data center demand.

The Investment Case

APLD's undervalued infrastructure—purpose-built for AI's energy and cooling needs—is a bet on the industry's long-term trajectory. Analysts project a price target of $14–$18 by early 2026, implying 50–100% upside from current levels. While risks remain, the company's financial flexibility, strategic partnerships, and first-mover advantage in HPC infrastructure make it a compelling speculative play for investors willing to look past short-term volatility.

In a world where AI's growth is only constrained by the infrastructure to support it, APLD is building the backbone of the future—one gigawatt at a time.