Applied Digital: A High-Volatility AI Infrastructure Play with a $7 Billion Lease Catalyst

The rise of artificial intelligence has ignited a global race for computing power, and Applied Digital (NASDAQ: APLD) is positioning itself at the intersection of this revolution. The company, a designer and operator of high-performance computing (HPC) infrastructure, has secured a transformative 15-year lease with CoreWeave, a leading AI hyperscaler, for 250 megawatts of capacity at its Polaris Forge 1 campus in North Dakota. With $7 billion in contracted revenue over the lease term—and an option to expand to 400 MW, adding $4 billion—Applied Digital has unlocked a catalyst that could redefine its trajectory.

Strategic Positioning: Power, Proximity, and Innovation

Applied Digital's core strength lies in its ability to deliver scalable, efficient, and cost-competitive infrastructure for HPC and AI. Its Polaris Forge 1 campus, designed to scale to 1 gigawatt, leverages North Dakota's abundant low-cost energy, over 200 days of natural free cooling, and a closed-loop, direct-to-chip cooling system with a Power Usage Effectiveness (PUE) of 1.18. This combination reduces operational costs and environmental impact, offering hyperscalers like CoreWeave a compelling value proposition.

The company's recent financials underscore this strategic edge. For the fiscal year ending May 31, 2025, revenue grew to $144.2 million, driven by the full operationalization of its 180 MW Ellendale facility. While the company reported a net loss of $161 million, adjusted EBITDA improved to $19.6 million, reflecting progress in scaling margins. The crypto-mining segment, though volatile, contributed $38 million in Q4 revenue—a 41% year-over-year increase.

The CoreWeave Lease: A Near-Term Catalyst

The $7 billion lease with CoreWeave is not just a revenue milestone; it is a structural transformation. By securing long-term, high-margin contracts, Applied Digital shifts from a capital-intensive construction model to a stable, recurring revenue stream. This aligns with broader industry trends: AI hyperscalers increasingly seek partners capable of delivering massive, efficient infrastructure quickly. CoreWeave's option to expand to 400 MW—valued at $11 billion total—adds further upside.

The lease also reduces execution risk. Polaris Forge 1's first 100 MW facility is slated for late 2025, with subsequent phases in 2026 and 2027. This phased deployment allows Applied Digital to generate cash flow incrementally while managing capital expenditures. Moreover, the company's recent $268.9 million equity and preferred stock raise—used to fund construction and operations—provides a buffer against short-term volatility.

Near-Term Earnings Potential and Risks

Despite its strategic advantages, Applied Digital operates in a high-risk, high-reward sector. Its balance sheet reflects this: $120.9 million in cash against $688.2 million in debt. However, the CoreWeave lease and existing contracts mitigate leverage concerns by providing predictable cash flows. Adjusted EBITDA turned positive in Q4 2025, signaling improving unit economics.

The company's innovation in modular design and supply chain efficiency further enhances its near-term prospects. By reducing build times from 24 months to 12–14 months, Applied Digital can capitalize on demand surges in AI infrastructure. Its cooling technology, which minimizes water use and energy waste, also positions it to meet growing ESG standards—a critical factor for hyperscalers under regulatory scrutiny.

Investment Thesis: Volatility as a Feature, Not a Bug

Applied Digital is a high-volatility play, akin to the early-stage infrastructure builders of the 2010s cloud boom. Its stock price is likely to swing with macroeconomic sentiment, energy prices, and AI adoption cycles. However, the CoreWeave lease and Polaris Forge 1's phased deployment create a floor for valuation. Investors must weigh the risks—debt, execution delays, and crypto market swings—against the potential for outsized gains as AI infrastructure demand accelerates.

For risk-tolerant investors, Applied Digital offers a unique opportunity to participate in the AI cloud revolution's next phase. The $7 billion lease is a catalyst; the real story lies in its ability to replicate this model in other regions and secure additional long-term contracts. If management executes on its vision, APLD could evolve from a speculative bet into a cornerstone of the AI infrastructure ecosystem.

In a world where computing power is the new oil, Applied Digital is building the pipelines. The question is not whether AI will reshape the economy—but how quickly it will do so. For those willing to tolerate the volatility, the rewards could be transformative.