Applied Digital Stock Down 13% Amid Valuation Concerns and Financing Woes

Applied Digital's stock fell 13.1% this week as investors weighed concerns around valuation and financing of the company's expanded capacity after securing a 150MW lease agreement with CoreWeave. The deal brings Applied Digital's total contracted lease revenue to approximately $11 billion, more than double its market capitalization. However, the company faces challenges in building and financing the expansion, carrying a significant debt load, and relying heavily on a single customer.

Applied Digital's stock experienced a notable decline of 13.1% this week, raising concerns among investors about the company's valuation and financing capabilities following its recent 150MW lease agreement with CoreWeave. The deal, which brings Applied Digital's total contracted lease revenue to approximately $11 billion, has more than doubled the company's market capitalization [1].

The lease agreement, signed on August 30, 2025, expands Applied Digital's Polaris Forge 1 Campus to deliver 400MW in total IT capacity to CoreWeave. This development, while significant, has sparked worries about the company's ability to build and finance the expansion, given its substantial debt load and reliance on a single customer [2].

The company's strategic expansion in AI infrastructure, while promising, comes with inherent challenges. Applied Digital faces the dual pressures of capital-intensive infrastructure projects and the need to secure long-term demand. The $5 billion investment from Macquarie Asset Management provides a financial runway, but the company's debt load and reliance on a single customer—CoreWeave—pose risks [3].

Moreover, the global AI infrastructure market is undergoing a seismic shift, driven by insatiable demand for compute power. Applied Digital's phased approach to scaling its infrastructure aligns with this demand, but the company must navigate regulatory scrutiny over energy consumption and competition from established hyperscalers [4].

Despite these challenges, Applied Digital's long-term leases with CoreWeave and Macquarie provide financial stability. The company's focus on sustainability, through renewable energy and energy-efficient cooling, addresses regulatory and environmental concerns. Additionally, the ability to generate recurring revenue from multi-decade contracts reduces exposure to short-term market volatility [5].

Investors should closely monitor Applied Digital's progress in building and financing its expansion. The company's alignment with macroeconomic trends and its strategic partnerships position it to play a significant role in the AI-driven economy. However, the challenges it faces require careful consideration and management.

References:

[1] https://www.newsdakota.com/2025/08/30/applied-digital-coreweave-ink-lease-agreement/
[2] https://www.ainvest.com/news/applied-digital-strategic-expansion-ai-infrastructure-unlocking-long-term-revenue-scalability-ai-driven-economy-2508/
[3] https://www.forbes.com/sites/greatspeculations/2025/08/21/whats-next-after-a-2x-surge-in-applied-digital-stock/
[4] https://ir.applieddigital.com/news-events/press-releases/detail/126/applied-digital-reports-fiscal-fourth-quarter-and-full-year
[5] https://www.quiverquant.com/news/Applied+Digital+Corporation+Releases+White+Paper+on+Cost-Effective+AI+Infrastructure+Design+and+Launches+Polaris+Forge+Data+Center+Region