Applied Digital secures $160 million in a private placement led by Nvidia

Applied Digital Corporation (APLD), a digital infrastructure company specializing in high-performance computing (HPC) and AI cloud services, has secured $160 million in a private placement led by Nvidia and real estate firm Related Companies. This investment will enable Applied Digital to fund its data center expansion and cloud computing projects, particularly a major data center in North Dakota. Nvidia’s participation highlights its strategic interest in supporting companies that utilize its AI chips, further strengthening its ecosystem.

The terms of the private placement involve Applied Digital issuing 49 million shares of common stock at $3.24 per share, the company’s closing price on September 4, 2024. This capital infusion will support Applied Digital’s growth initiatives, including the development of an additional 300MW of data center capacity and the build-out of one of the world’s largest data centers. The funds will also help Applied Digital secure debt financing for future projects, enhancing its financial position as it scales its AI and cloud computing operations.

Applied Digital has a strong relationship with Nvidia, being one of its Preferred Cloud Partners. The company leverages Nvidia’s chips to power its AI cloud services, making it a key player in providing the infrastructure needed for advanced AI and HPC workloads. Nvidia’s investment reinforces its confidence in Applied Digital’s ability to deliver cutting-edge solutions, positioning the company as a leader in the AI-driven data center market.

With a small share float of 112 million and a high short interest of 16%, Applied Digital's stock is likely to remain volatile. However, this significant investment from Nvidia and other institutional investors demonstrates strong confidence in the company’s growth potential, particularly as demand for AI and HPC solutions continues to rise.

Shares of APLD are up 55% following the news. The stock is holding above the $5 psyche level which lines up as a key area of support for the stock.

On August 28, Applied Digital Corporation reported fiscal Q4 2024 revenue of $43.7 million, reflecting a 98% year-over-year increase driven by expanded capacity across its Data Center Hosting facilities and the launch of its Cloud Services segment. However, the company posted a significant net loss of $64.8 million, with an adjusted net loss of $45.3 million, primarily impacted by $15.5 million in expenses related to facilities and equipment not yet generating revenue. Adjusted EBITDA for the quarter came in at $4.8 million, a slight improvement from $3.4 million in the previous year.

For fiscal year 2024, the company achieved total revenue of $165.6 million, up significantly from $55.4 million in fiscal 2023. Despite the strong top-line growth, Applied Digital posted a net loss of $149.7 million, with adjusted net loss rising to $77.5 million, largely due to $38.5 million in expenses tied to non-revenue-generating facilities. The company resolved transformer issues at its Ellendale Data Center Hosting facility, restoring it to full capacity, and also secured new business opportunities, including an LOI with a U.S.-based hyperscaler for 400 MW capacity.

Looking ahead, Applied Digital is focused on expanding its Cloud Services division, which generated $29 million in fiscal 2024 revenue, and developing additional data center hosting capacity. The company is working on several major projects, including a 100 MW facility under construction in Ellendale and two additional facilities planned for future development. Despite challenges, Applied Digital expects sequential revenue improvements as it enters fiscal 2025.