Applied Digital is offering its $2.35 billion junk bond at what would be the US market’s second-biggest discount of 2025, as the deal has struggled to generate investor demand https://t.co/ZbrXELgdCT ...

Core Insights - ABB has expanded its partnership with Applied Digital to supply power infrastructure for a new AI Factory campus in North Dakota, focusing on medium voltage electrical infrastructure to meet the growing power demands of AI workloads [1][2][3] - The Polaris Forge 2 campus will feature 300 MW of AI data centers, with two buildings set to come online in 2026 and 2027, designed for future expansion [2][3] - The collaboration aims to enhance efficiency and performance in large-scale AI facilities, utilizing ABB's innovative HiPerGuard medium voltage UPS technology [3][5] Company Overview - ABB is a global leader in electrification and automation, with over 140 years of history and approximately 110,000 employees worldwide [4] - The company focuses on enabling sustainable and resource-efficient operations across industries, promoting high performance and productivity [4] Partnership Details - The partnership with Applied Digital was first announced in June 2025, supporting the development of the first 400 MW AI Factory campus, Polaris Forge 1, in Ellendale, North Dakota [3] - The initial 200 MW capacity at the Polaris Forge 2 campus will be leased to a US-based Hyperscaler, showcasing the demand for high-performance AI infrastructure [3]

Core Insights - The financing boom for AI infrastructure is showing signs of cooling, as evidenced by Applied Digital's $2.35 billion bond issuance for data center construction receiving lukewarm market interest [1][3] - The bond issuance faced challenges due to the speculative credit rating of its main tenant, CoreWeave, leading to increased financing costs [1][3][7] Market Reaction - Applied Digital's bond offering only received about $2 billion in orders, contrasting sharply with recent successful transactions in the same sector [3][4] - The expected yield on Applied Digital's bonds is around 8.5%, significantly higher than the yields of recent comparable offerings, which were 7.75% and 7.125% for TeraWulf and Cipher Mining, respectively [4][5] Comparison with Previous Offerings - TeraWulf's $3.2 billion bond issuance attracted over $10 billion in orders, while Cipher Mining's $1.4 billion bond drew more than $7 billion in subscriptions, largely due to implicit support from Alphabet, Google's parent company [5][6] - The lack of such strong backing for Applied Digital's offering has raised investor concerns, particularly given CoreWeave's speculative credit rating [6][7] Dependency on CoreWeave - Standard & Poor's Global Ratings noted that Applied Digital is "highly dependent on CoreWeave," which is expected to contribute approximately two-thirds of its contract revenue [8]

Group 1 - The financing boom for artificial intelligence infrastructure is facing challenges, highlighted by a large bond issuance related to AI company CoreWeave that did not attract strong market interest due to high risk exposure [1] - Applied Digital's $2.35 billion junk bond issuance received only about $2 billion in orders, contrasting sharply with recent successful transactions in the same sector [1][2] - The main reason for the lukewarm market response is the lack of credit backing from major players like Alphabet, which was present in previous successful deals involving TeraWulf and Cipher Mining [1][2] Group 2 - Applied Digital's bonds are expected to yield around 8.5%, significantly higher than the yields of recent comparable transactions, which were 7.75% for TeraWulf and 7.125% for Cipher Mining [1] - TeraWulf's $3.2 billion bond attracted over $10 billion in orders, while Cipher Mining's $1.4 billion bond drew more than $7 billion, largely due to implicit support from Alphabet [2] - Standard & Poor's noted that Applied Digital is "highly dependent on CoreWeave," which is expected to contribute about two-thirds of its contract revenue, raising investor concerns [2]

Financial Data and Key Metrics Changes - Adjusted EBITDA increased by 58% compared to Q3 2024, while operating income surged by 315% year-over-year [5] - Consolidated revenues for Q3 2025 were $149 million, roughly in line with Q3 2024 [11] - Adjusted EBITDA for Q3 2025 was $12.6 million, up from $8 million in Q3 2024, exceeding street expectations [12] Business Line Data and Key Metrics Changes - Global parts and services revenue reached $68.4 million in Q3 2025, compared to $61.7 million in Q3 2024, driven by increased electricity demand from fossil fuels [11] - The backlog rose by 56% quarter-over-quarter to over $393 million, reflecting strong demand for projects, upgrades, and construction [5] Market Data and Key Metrics Changes - The company is experiencing increasing demand for power generation in North America, particularly due to the needs of AI data centers and industrial utilities [4][6] - The company anticipates a significant growth in EBITDA for 2026, projecting a range of $70 million to $85 million, representing an 80% increase year-over-year from 2025 [6][12] Company Strategy and Development Direction - The company is focusing on expanding its global parts and services business while divesting non-core assets to reduce debt [4] - Babcock & Wilcox is positioning itself to support AI data center expansion and increased baseload generation needs [4] - The company is pursuing opportunities in the AI data center space, with a potential pipeline of $3 to $5 billion in projects [9][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth prospects, citing improved margins and a strong backlog [5][6] - The company is in discussions for several AI data center projects, which are expected to drive higher power demands [6][9] - Management highlighted the importance of proven technology in reducing project risks and ensuring timely execution [43] Other Important Information - The company has improved its balance sheet significantly, with total debt at $379.3 million as of September 30, 2025 [12] - Recent equity raises have strengthened the balance sheet, allowing for the planned paydown of bonds due in 2026 [13] Q&A Session Summary Question: Can you discuss the $1.5 billion project and its potential contribution? - Management is working with Applied Digital to finalize project details and anticipates a full notice to proceed in the coming months, with minimal engineering required due to the use of proven technology [19][20] Question: What is the status of the additional pipeline opportunities? - Management indicated that the pipeline has grown to $3 to $5 billion, with several projects in various stages of maturity expected to move forward within the next year [26][27] Question: What is the company's capacity for the power generation segment? - Management stated that they are evaluating internal and external manufacturing capacities and are confident in their ability to meet demand for boiler fabrication and steam turbine supply [29][30]

Core Insights - IREN Limited is rapidly expanding its AI cloud business, doubling its GPU capacity to 23,000 through a $674 million investment in additional GPUs [1][8] - The company anticipates achieving an annualized run-rate revenue of $500 million in AI Cloud by Q1 of fiscal 2026, with current contracts for 11,000 GPUs supporting $225 million in ARR [2][8] - IREN raised $979 million through a convertible note offering, indicating strong investor interest, and is projected to reach $1.25 billion in annualized revenues by December 2025, with significant contributions from both bitcoin mining and AI Cloud [3] Company Performance - IREN shares have surged 502.7% year-to-date, significantly outperforming the broader Zacks Finance sector and the Zacks Financial Miscellaneous Services industry [6][8] - The stock is currently trading at a price/cash flow multiple of 63.42X, which is considerably higher than the industry average of 19.22X [12] Competitive Landscape - IREN faces strong competition from Applied Digital and TeraWulf in the AI infrastructure sector, with Applied Digital benefiting from high demand for data center infrastructure and energy efficiency [4] - TeraWulf is expected to grow its revenue through its joint venture with Fluidstack, focusing on high-performance computing, with preliminary Q3 2025 revenues projected to show 84% year-over-year growth [5]

Group 1: Data Center Expansion and AI Demand - Massive data center complexes are emerging to support AI, with 12 GW of new capacity added in 2024 and 35 GW-scale projects announced compared to three in the previous year [1] - New AI factories are being established in various locations across North America, including North Dakota and Alberta, Canada, with innovative power solutions like wind farms and natural gas generation [1] Group 2: Backup Generators and Power Solutions - Backup generators are becoming essential due to a chronic power shortage in North America, with developers seeking rapid power solutions for AI workloads [2] - A significant data center project in Millard County, Utah, is set to add up to 4 GW of power using natural gas generators and battery storage [2] Group 3: Gas Engine Market Growth - The global gas generator market is valued at $6.9 billion in 2024, with an expected growth rate of 8.8% annually, reaching $16 billion by 2034 [3] - The segment for gas generators beyond 330 kVA is the fastest growing, projected to exceed $3.5 billion by 2034 due to rising demand from data centers and AI [3] Group 4: Manufacturing and Infrastructure Development - Fidelity Manufacturing has expanded significantly, growing from 40 to over 500 employees in less than a decade, driven by data center demand for generators [4] - The company has opened a new factory to increase production capacity and is constructing additional storage and production facilities [4] Group 5: Generator Specifications and Installation - Data center managers are advised to consider acoustical performance, reliability, and longevity when selecting gas generator packages [5] - Modern gas engines can provide up to 2.5 MW, and design considerations must comply with safety and building codes [5][6] Group 6: Transition from Diesel to Natural Gas - Diesel generators, traditionally used for backup, are being replaced by natural gas generators, which can serve as prime power sources for data centers [7] - Natural gas generators offer a quicker installation timeline compared to utility power, allowing data centers to operate fully while awaiting additional power sources [7]

Core Insights - Nvidia-related stocks experienced a significant upward movement, with Applied Digital rising over 8% and NEBIUS increasing more than 7% [1] - Other companies such as Arm Holdings and CoreWeave also saw gains in their stock prices [1]

Group 1 - Applied Digital signed a $5 billion AI factory lease agreement with a cloud computing service provider for a duration of 15 years, which will enhance its computing power to 600 MW across two sites in North Dakota [5][6] - General Motors (GM) introduced new technologies including "eyes-off" autonomous driving and a conversational AI system developed with Google, aiming to enhance convenience and safety for consumers [8][10] - Morgan Stanley estimates that Amazon could save up to $4 billion annually by automating its warehouses, with a projected savings of $2 billion to $4 billion by 2027 due to a 20% to 40% reduction in order fulfillment costs [15] Group 2 - Google announced a breakthrough in quantum computing with its Willow chip, which reportedly runs algorithms 13,000 times faster than the best supercomputers, indicating potential applications in medicine and materials science [16][17] - Microsoft is pushing for further integration of Windows and Xbox, launching the ROG Xbox Ally series handheld gaming consoles, which can run PC games natively and stream games from Xbox consoles, marking a strategic shift in its gaming business [18]

And with our indexes under pressure today, I do want to bring in our next guest, have a more macro conversation about where we might be heading for the rest of the year. Joining us now, Dale Smothers. Uh Dale, president and CEO of RDS Wealth Management.Dale, thanks as always for being with us. You know, I'd love to just get your thoughts on the market action we're seeing and and where we could potentially head by the year end. >> Yeah, good to be with you, Marley.I I think that this price action we've seen ...