Applied Digital Corporation (NASDAQ:APLD) is one of the best AI stocks to buy according to analysts. On August 29, Applied Digital announced it has finalized a new lease agreement with CoreWeave for an additional 150MW at its Polaris Forge 1 Campus in Ellendale, North Dakota. The new long-term lease, along with two initial ~15-year leases executed in May of the same year, brings the total contracted capacity to 400MW for CoreWeave’s AI and high-performance computing initiatives. The combined value of thes ...

Core Insights - Data center stocks experienced significant gains following the announcement of a major leasing deal between Nebius Group N.V. and Microsoft Corporation [1] Group 1: Company Developments - Nebius Group N.V. and Microsoft Corporation have entered into a substantial leasing agreement, which has positively impacted the performance of data center stocks [1] Group 2: Market Context - The article reflects on the author's extensive experience in the technology, media, and telecommunications (TMT) sectors, emphasizing the importance of momentum in investment strategies [1]

Group 1 - Applied Digital Corp. (NASDAQ:APLD) experienced a significant share price increase of 34.48% week-on-week, driven by optimism in the high-performance computing (HPC) sector and comments from CoreWeave's CEO regarding AI firms' demand for computing capacity [1][2] - The HPC sector is seeing increased investments, highlighted by Nebius Group securing an $18 billion cloud computing deal with Microsoft, indicating a growing trend in the industry [2] - Applied Digital finalized an expanded lease agreement with CoreWeave, potentially generating up to $11 billion in revenues, covering 400 MW of critical IT capacity across three long-term leases at its Polaris Forge 1 Campus in North Dakota [2][3]

Group 1 - Shares of Applied Digital (NASDAQ: APLD) increased by 34.5% this week, driven by a broader market rise with the S&P 500 and Nasdaq-100 up 1.6% and 1.9% respectively [1] - The surge in Applied Digital's shares followed a significant $17.4 billion deal between Microsoft and AI cloud provider Nebius for AI infrastructure over the next five years, indicating strong demand for data centers [2] - Nebius CEO Arkady Volozh anticipates more similar deals in the future, which will further accelerate the growth of their AI cloud business beyond 2026 [2] Group 2 - The AI data center market presents substantial opportunities, but companies like Applied Digital face significant risks, including high levels of debt and the potential need to borrow more at high interest rates or dilute existing shareholders [4] - There is a concern that demand for AI data centers may eventually cool, leaving companies like Applied Digital vulnerable [5] - Despite the positive news surrounding the Microsoft-Nebius deal, analysts suggest caution regarding investments in Applied Digital due to the associated risks [6][5]

Core Insights - The AI infrastructure market is projected to grow from $87.6 billion in 2025 to $197.64 billion by 2030, with a CAGR of 17.71% [2] - Dell Technologies (DELL) and Applied Digital (APLD) are key players in this market, with DELL focusing on AI-optimized servers and enterprise IT solutions, while APLD specializes in high-performance computing and AI data centers [1] Dell Technologies (DELL) - DELL is experiencing strong demand for AI servers due to ongoing digital transformation and interest in generative AI applications [3] - In Q2 of fiscal 2026, DELL shipped $8.2 billion in AI servers and raised its full-year shipment guidance from $15 billion to $20 billion, indicating sustained demand [4] - DELL's AI backlog reached $11.7 billion at the end of Q2 fiscal 2026, with a $5.6 billion increase in orders during the same period [5] - The company has an expanding partner base, including Nvidia, AMD, and Meta, enhancing its ecosystem and interest in its AI solutions [6] - DELL's shares are trading at a low valuation of 0.76X forward sales, suggesting a potential investment opportunity [11][15] Applied Digital (APLD) - APLD signed a 15-year lease agreement with CoreWeave to deliver 250 megawatts of IT load at its Polaris Forge 1 campus, expected to generate approximately $7 billion in contracted revenues [7] - The Polaris Forge 1 facility is designed for AI and high-performance computing, with plans for additional facilities to scale up to 1 gigawatt [8] - APLD is also expanding with the construction of Polaris Forge 2, a $3 billion, 280MW AI Factory, expected to create over 200 jobs [9] - APLD shares have appreciated 122.2% year-to-date, driven by demand for AI infrastructure, but the stock is currently considered overvalued at 14.46X forward sales [10][15] Financial Performance and Valuation - DELL's fiscal 2026 earnings estimate is $9.54 per share, reflecting a 17.20% year-over-year increase [17] - APLD reported a loss of 80 cents per share in the previous year, indicating ongoing challenges in achieving profitability [17] - DELL holds a Zacks Rank 2 (Buy), while APLD has a Zacks Rank 3 (Hold), suggesting a stronger investment case for DELL [19]

Core Insights - Applied Digital (APLD) shares have appreciated 122.2% year to date (YTD), significantly outperforming the broader Zacks Finance sector's return of 12.1% and the Zacks Financial – Miscellaneous Services industry's return of 3.8% [1] - APLD's strong performance is attributed to robust demand for data center infrastructure and a growing focus on energy efficiency within the data center industry [2] - The global AI market is projected to reach $500 billion by 2027, necessitating high-capacity data centers to support AI applications [2] Company Performance - APLD operates data center hosting services with a total capacity of approximately 286 megawatts (MWs) [7] - The Polaris Forge 1 facility is designed to scale up to 1 gigawatt (GW) and is expected to drive long-term growth, with the first 100-MW facility operational by Q4 2025 [9] - APLD has secured lease agreements with CoreWeave for 400 MW, with anticipated lease revenues of approximately $11 billion [11] Industry Trends - Strong spending by hyperscalers is expected to exceed $350 billion by 2025, which is beneficial for APLD as they require high-capacity data centers [3] - The demand for AI infrastructure is increasing, with AI queries requiring significantly more electricity than traditional queries, presenting a growth opportunity for APLD [10] Financial Outlook - APLD reported fiscal 2025 revenues of $144.2 million, a 6% increase from fiscal 2024, primarily driven by Data Center Hosting [12] - The Zacks Consensus Estimate for APLD's fiscal 2026 loss has widened to 34 cents per share, indicating a challenging near-term outlook [13] - APLD's stock is currently considered overvalued, trading at a forward price/sales ratio of 14.46X compared to the industry average of 3.58X [15] Investment Considerations - The CoreWeave lease deal enhances revenue visibility, which is favorable for long-term investors, but rising loss estimates and high valuation present risks [18] - APLD currently holds a Zacks Rank 3 (Hold), suggesting that investors may want to wait for a more favorable time to accumulate the stock [19]

Group 1 - Applied Digital Corp. (NASDAQ:APLD) experienced a significant increase of 11.71% on Wednesday, closing at $16.98, driven by positive investor sentiment towards the artificial intelligence industry [1][3] - The company is benefiting from a broader trend where investors are investing in digital infrastructure, particularly after Nebius Group secured an $18 billion cloud computing deal with Microsoft, highlighting the demand for scalable computing power [2] - An expanded lease agreement with CoreWeave could potentially generate up to $11 billion in revenues for Applied Digital, covering 400 MW of critical IT capacity across three long-term leases at its Polaris Forge 1 Campus in North Dakota [3][4] Group 2 - The CEO of Applied Digital emphasized the company's commitment to developing AI infrastructure in North Dakota, positioning the state as a strategic hub for the digital economy and AI advancements [5] - The overall optimism in the AI sector suggests that investing in companies like Applied Digital could provide early exposure to a rapidly growing industry [3]

Group 1 - Applied Digital Corporation (NASDAQ:APLD) has finalized a new lease agreement with CoreWeave for an additional 150MW of data center capacity at its Polaris Forge 1 Campus in Ellendale [1] - The new lease increases the total contracted lease revenue for the company to approximately $11 billion, which includes $7 billion from two earlier leases signed in May 2025 [2] - The Polaris Forge 1 Campus will now have a total IT capacity of 400MW across three long-term lease agreements with CoreWeave, with the additional 150MW expected to be ready for service by 2027 [2] Group 2 - Following the announcement, Robert Brown from Lake Street maintained a Buy rating on Applied Digital Corporation with a price target of $18, reflecting around 44% upside from current levels [3] - Applied Digital Corporation is recognized as a technology company that designs, develops, and operates next-generation digital infrastructure and cloud services across North America [3]

Group 1 - The article emphasizes the growth prospects of AI data centers in the upcoming months, highlighting a positive outlook for the sector [1] - The analyst, Uttam, specializes in technology sector research, focusing on semiconductors, artificial intelligence, and cloud software, indicating a strong emphasis on innovation and technological advancement [1] - Uttam's background includes experience in leading teams at major technology firms like Apple and Google, which adds credibility to his insights on the industry [1] Group 2 - The newsletter authored by Uttam and Amrita Roy is recognized by leading publications, suggesting that their analyses are well-regarded in the financial community [1] - The research covers additional sectors such as MedTech, Defense Tech, and Renewable Energy, indicating a broad scope of analysis that may uncover diverse investment opportunities [1]

Group 1 - Applied Digital's stock fell 13.1% this week despite securing an $11 billion AI data center deal with CoreWeave [1][2][3] - The company announced a 150MW lease agreement with CoreWeave, increasing its total anticipated contracted lease revenue to approximately $11 billion, which includes $7 billion previously announced [3][4] - Applied Digital's current market capitalization is around $3.6 billion, indicating that the new deal represents more than double the company's market cap, although the revenue will be spread over 15 years [4] Group 2 - The company faces challenges in building and financing the expansion of its infrastructure, needing to construct three data centers over the next two years, which will require substantial capital expenditure [5] - Concerns about valuation persist, as the company carries significant debt and will need to borrow more at high rates or dilute its stock [6] - The reliance on a single customer for a large portion of revenue poses additional risks, especially given that this customer is also highly leveraged and dependent on a small customer base [6]