Applied Digital: A High-Conviction Play in the AI Infrastructure Gold Rush

The AI infrastructure boom has created a new frontier for capital allocation, and few companies are positioned to capitalize as aggressively as Applied Digital. With a $11 billion lease agreement with CoreWeave, a 4-gigawatt (GW) active development pipeline, and a strategic focus on power-efficient, high-density data centers, Applied Digital is emerging as a critical player in the race to build the next generation of AI compute infrastructure. This article examines how the company's execution-driven growth model, long-term tenant relationships, and infrastructure advantages position it as a high-conviction investment in the AI era.

Securing the Future: Long-Term, High-Margin Contracts

Applied Digital's partnership with CoreWeave exemplifies its ability to lock in recurring, high-margin revenue. The company finalized an additional 150MW lease agreement with CoreWeave at its Polaris Forge 1 campus in North Dakota, bringing total contracted capacity to 400MW and securing approximately $11 billion in lease revenue over 15 years. This agreement, combined with a $5 billion lease with an unnamed U.S. hyperscaler at Polaris Forge 2, underscores Applied Digital's success in attracting investment-grade tenants.

The financial implications are staggering. Once Polaris Forge 1 is fully operational, the campus is projected to generate an annualized net operating income (NOI) of $500 million, with a long-term target of $1 billion in NOI within five years according to its Q1 2026 results. These figures highlight the company's ability to convert long-term leases into predictable cash flows, a critical advantage in an industry where capex intensity often overshadows near-term profitability.

Strategic Infrastructure Positioning: Power, Climate, and Scalability

Applied Digital's North Dakota campuses are engineered to exploit regional advantages. The Polaris Forge 1 campus leverages the state's abundant renewable energy, low power costs, and naturally cool climate to reduce operational expenses. According to the company, these factors are projected to yield $2.7 billion in savings over 30 years. This is a stark contrast to data centers in warmer regions, where cooling costs can erode margins.

Moreover, the campus is designed for scalability. Polaris Forge 1 can expand to 1 gigawatt (GW) of capacity, with additional power allocations expected to push output beyond 1 GW starting in 2028–2030. This flexibility positions Applied Digital to meet surging demand for AI compute without overbuilding, a key risk in capital-intensive industries.

Execution-Driven Growth: Financing, Construction, and Management Guidance

Applied Digital's execution has been equally impressive. The company secured $162.5 million in new financing in Q1 2026, including a $112.5 million draw from a $5 billion preferred equity facility with Macquarie Asset Management. This funding strategy reduces reliance on equity dilution while accelerating project timelines. Construction of the first 100MW building at Polaris Forge 1 remains on schedule for Q4 2025, and the second 150MW phase is expected to come online in mid-2026 according to its latest development updates.

Management's guidance further reinforces confidence. The company has a 4-GW active development pipeline, with projects slated to enter construction within six to 12 months according to management guidance. This includes Polaris Forge 2, where an "investment-grade hyperscaler" holds first right of refusal on the full 1 GW of capacity according to investment analysis. Such tenant relationships reduce the risk of underutilized infrastructure, a common challenge in the data center sector.

A 4-GW Pipeline and the Path to Dominance

Applied Digital's ambitions extend far beyond North Dakota. The company's 4-GW pipeline aligns with the projected $350 billion in AI data center investments by public hyperscalers in 2025 according to industry forecasts. This scale is critical in an industry where first-mover advantage and infrastructure density determine long-term success. By securing long-term leases with CoreWeave and other hyperscalers, Applied Digital is effectively locking in a share of this massive market.

The financial metrics also tell a compelling story. Despite a Q1 2026 net loss of $27.8 million, driven by rising costs and SG&A expenses, the company's revenue grew 84% year-over-year to $64.2 million. This growth was fueled by $26.3 million in tenant fit-out services for CoreWeave, demonstrating Applied Digital's ability to monetize its partnerships beyond base rent.

Conclusion: A High-Conviction Investment Thesis

Applied Digital's combination of long-term revenue visibility, strategic infrastructure positioning, and execution-driven growth makes it a standout in the AI infrastructure sector. The company's ability to secure $11 billion in contracted revenue with CoreWeave, coupled with a 4-GW pipeline and access to deep-pocketed financing partners, creates a durable competitive advantage. While near-term profitability remains a challenge, the scale of its projects and the recurring nature of its revenue streams suggest that Applied Digital is poised to deliver outsized returns as the AI gold rush accelerates.

For investors seeking exposure to the next phase of the digital economy, Applied Digital offers a compelling case: a company building the physical backbone of AI, with the financial and operational discipline to turn ambition into reality.