Will Applied Digital's Second Campus Unlock the Next Leg of Growth?

Core Insights - Applied Digital's Polaris Forge 2 development signifies the company's expansion into AI-focused data center infrastructure, starting with an initial 300 megawatts of IT load and potential scaling to a full gigawatt as power becomes available [1][2] - The success of Polaris Forge 1, which is fully leased at 400 megawatts and has approximately $11 billion in long-term contracted revenues, sets a precedent for the second campus [1] - The Zacks Consensus Estimate for fiscal 2026 revenues is projected at $280.9 million, indicating potential growth as new capacity is deployed [1] Development Context - Polaris Forge 2 is being developed amid rising demand for liquid-cooled, high-density AI infrastructure, with limited power-ready sites available [2] - The project is designed to meet customer needs for clear construction schedules and advanced cooling capabilities as demand trends into 2026 and 2027 [2] Broader Infrastructure Factors - Applied Digital has 700 megawatts under construction and a 4-gigawatt active development pipeline, which may influence the pace of Polaris Forge 2's development [3] - Factors such as labor availability, material lead times, financing costs, and shifts in regional power markets could impact scheduling and spending for the project [3] Competitive Landscape - Applied Digital faces competition from both emerging and established providers, such as Riot Platforms and Equinix, who are also expanding their capacities for AI workloads [4] - Riot Platforms aims to exceed one gigawatt of future capacity, while Equinix operates over 260 data centers globally, focusing on power-dense environments [4] - APLD differentiates itself through its focus on purpose-built, liquid-cooled infrastructure and rapid development at sites like Polaris Forge 2 [4] Stock Performance and Valuation - Applied Digital's stock has increased by 179.7% year to date, significantly outperforming the broader Zacks Finance sector and the Zacks Financial-Miscellaneous Services industry, both of which returned 11.2% [5] - The company's stock is considered overvalued, with a forward 12-month price/sales ratio of 15.01X compared to the sector's 8.93X, resulting in a Value Score of F [9] - The Zacks Consensus Estimate for fiscal 2026 loss is projected at 31 cents per share, a narrowing of six cents over the past 30 days, compared to a loss of 80 cents per share in the previous year [11]