Cooling the AI Revolution: Why Applied Digital's Data Centers Are Heating Up as Investments

The global AI data center market is on fire. Expected to balloon from $236 billion in 2025 to over $933 billion by 2030, the sector is fueled by industries racing to adopt AI for everything from drug discovery to autonomous vehicles. Yet, one critical challenge looms: energy consumption. Cooling systems, which account for roughly 40% of data center energy use, have become the unsung heroes of this boom. Enter Basx, whose cutting-edge cooling technology is enabling Applied Digital to build AI data centers that are not just scalable but also cost-efficient and environmentally sustainable. Here's why investors should take note.

The Scalability Crisis: Why Cooling Matters

AI workloads—particularly those involving large language models or advanced simulations—are computationally intense. This creates a paradox: the more powerful the hardware (like GPUs), the more heat it generates, requiring ever more energy to cool. Traditional data centers, with their bulky air-cooling systems, struggle to keep up.

Basx's custom liquid cooling solutions break this cycle. Their systems achieve a 0.065kW/Ton power draw, a fraction of the 0.5kW/ton standard in legacy systems. This translates to 30–40% energy savings for Applied Digital's facilities. Paired with Applied Digital's strategic location in North Dakota—a region with 220+ days of “free cooling” via ambient air—the savings are amplified. For example, its Polaris Forge 01 facility operates at a Power Usage Effectiveness (PUE) of 1.18, far below the industry average of 1.5–2.0.

Applied Digital's Competitive Edge: Location + Tech = Profitability

Applied Digital isn't just a beneficiary of Basx's tech; it's a visionary architect of purpose-built AI campuses. Here's why its model works:

1. Strategic Geography:
   North Dakota's cold climate and cheap, surplus electricity (from stranded power assets) allow Applied Digital to slash costs. Its 100MW Polaris Forge 01 facility saves $50–60 million annually compared to traditional data centers.

2. Partnerships with Giants:
   A $7 billion, 15-year lease with CoreWeave (a leading AI cloud provider) underscores market confidence in Applied Digital's infrastructure. The deal secures 250MW of capacity, locking in revenue streams for years.

3. Modular Scalability:
   Applied Digital is expanding its Ellendale campus to 400MW capacity using pre-engineered modules. This “plug-and-play” approach reduces construction time and risk, while Basx's adaptable cooling systems ensure each new section integrates seamlessly.

ESG: The Unseen Advantage

Sustainability isn't just a buzzword—it's a regulatory and investor mandate. Applied Digital's ESG profile shines here:

• Energy Efficiency: 20% of its energy comes from renewables today, with a target of 100% by 2030. Its EDGE2 facility in Jakarta already operates at a PUE of 1.25 using solar power.
• Water Conservation: Closed-loop liquid cooling eliminates evaporative losses, achieving near-zero Water Usage Effectiveness (WUE).
• Community Impact: Its R-WISH program addresses housing shortages in North Dakota, earning it the DCD Community Impact Award in 2025.

These efforts align with the $1.4 billion in solar and wind projects Applied Digital has under contract, reducing its carbon footprint while future-proofing against rising environmental regulations.

The Market Opportunity: TAM Growth and Barriers

The AI data center market isn't just growing—it's hyper-scaling. Key drivers include:

• Hyperscalers' AI Arms Race: Tech giants like Google and Microsoft are building AI-specific data centers, but Applied Digital's low-cost, high-efficiency model could carve out a niche for specialized operators.
• Government Incentives: Regions like Asia Pacific (led by China and India) are pouring money into AI infrastructure, while U.S. policies like the Inflation Reduction Act subsidize green tech.

Barriers? Yes, but Applied Digital is prepared:
- Power Shortages: Applied Digital's early investment in North Dakota's stranded power assets positions it ahead of the curve as U.S. data center capacity faces a potential 36GW shortfall by 2028.
- Capital Costs: Its $5 billion financing deal with Macquarie ensures it can scale without over-leverage, while convertible notes provide flexibility to fund growth.

Investment Thesis: Buy the Cooling Leader

Applied Digital's stock (APLD) offers a rare combination of growth and stability in the AI infrastructure space. With a 93% year-over-year jump in adjusted EBITDA to $21.4 million in Q2 2025, and a backlog of hyperscaler negotiations, the company is primed to capitalize on the AI boom.

Risks? Sure—delays in securing hyperscaler leases or rising interest rates could pressure margins. But the long-term tailwinds are undeniable. Basx's cooling tech gives Applied Digital a structural cost advantage, while its ESG and geographic strategies mitigate risks.

Recommendation: Investors seeking exposure to AI infrastructure should consider APLD. The stock trades at a forward P/E of 22x, reasonable given its growth profile. For a conservative entry point, wait for a dip below $25/share.

In the AI era, the race isn't just about computing power—it's about cooling it efficiently. Applied Digital is leading that race.

Disclosure: This article is for informational purposes only and not financial advice. Always conduct your own research or consult a financial advisor.