Applied Digital Shares Plummet 12.68% as $2.35 Billion Debt Offering Sparks Volatility Trading Volume Ranks 157th

Market Snapshot

On November 13, 2025, Applied Digital (APLD) experienced a sharp decline of 12.68%, closing with a trading volume of $0.74 billion, which ranked 157th in daily market activity. The drop followed the company’s announcement of a $2.35 billion senior secured notes offering by its subsidiary, APLD ComputeCo LLC, aimed at funding data center construction and debt repayment. Despite a pre-market rally of 1.71% to $31.51 on Monday, the stock reversed sharply, reflecting investor caution around the company’s capital structure and project execution risks. Analysts had previously highlighted APLD’s potential, with nine firms maintaining “Buy” ratings and a median price target of $37.

Key Drivers

The $2.35 billion senior secured notes offering, announced on November 10, 2025, represents a pivotal strategic move for Applied Digital. The proceeds will fund construction of two data centers (100 MW and 150 MW) at its Ellendale, North Dakota campus (Polaris Forge 1), repay existing credit agreements with Sumitomo Mitsui Banking Corporation, and establish a debt service reserve. The notes are secured by first-priority liens on APLD ComputeCo’s assets and equity interests, with Applied Digital providing completion guarantees to ensure project timelines. While this financing underscores the company’s aggressive expansion into AI and cloud infrastructure, it also raises concerns about increased leverage. The debt-to-equity ratio, currently 0.67, could rise significantly if the offering closes, potentially straining financial flexibility.

The offering aligns with broader trends in the data center sector, where firms are pivoting from cryptocurrency mining to high-performance computing (HPC) and AI infrastructure. Applied Digital’s peers, such as Cipher Mining and CleanSpark, have also announced large-scale debt financings, including $1.4 billion and $1.15 billion offerings, respectively. This competitive landscape highlights the capital-intensive nature of AI data center development and the reliance on secured debt to fund projects. However, the notes’ private placement under Rule 144A limits liquidity, which may deter broader investor participation and amplify volatility.

Risks tied to the offering are prominently featured in the press releases. The notes are subject to market conditions, with no assurance of completion, and include forward-looking statements about project timelines and financial obligations. Additionally, the company’s insider trading activity—20 sales by executives totaling $22.6 million in the past six months—has raised questions about management’s confidence in the stock’s near-term prospects. While analysts remain optimistic, with a median price target of $37 and nine “Buy” ratings, the stock’s recent performance suggests market skepticism about the scalability of Applied Digital’s Polaris Forge model.

The project’s scale and complexity add further uncertainty. The Ellendale campus, part of a 400 MW development, is already under lease agreements with CoreWeave and a U.S. hyperscaler, expected to generate $11 billion and $5 billion in lease revenue over 15 years, respectively. However, delays in construction or cost overruns could jeopardize these revenue streams. Applied Digital has also secured a $787.5 million funding draw from Macquarie Asset Management, contingent on the senior notes’ closure, to support Polaris Forge 1 and 2. This interdependency between financings introduces execution risk, as any delay in the notes offering could stall broader development.

Finally, the company’s gross profit margin of 22.61%—highlighted as “relatively weak” by some analysts—adds pressure to deliver on projected revenue growth. While the Polaris Forge 1 campus achieved its first Ready-for-Service milestone in November 2025, scaling to 400 MW will require sustained capital allocation and operational efficiency. The offering’s success will hinge on Applied Digital’s ability to balance rapid expansion with financial prudence, a challenge that has defined the sector’s transition from cryptocurrency mining to AI infrastructure.