Up 4x This Year, What’s Next For Applied Digital Stock?

Applied Digital (NASDAQ:APLD) is a digital infrastructure company that designs, builds, and operates AI-first data centers and high-performance computing (HPC) facilities. The stock has surged by almost 20% over the last five trading days, and remains up by roughly 330% year-to-date. The recent rally comes after the company posted a strong set of first-quarter results, that was boosted by artificial intelligence data center demand, with sales rising by about 84% from a year ago to $64.2 million. While Applied Digital’s business sits at the heart of the ongoing AI infrastructure boom, with a valuation near $10 billion and the stock trading at a lofty 33x forward revenue, investors are now asking whether the rally still has legs.

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Purpose-Built AI Data Centers

Unlike legacy data centers being retrofitted for AI workloads, Applied builds its campuses from the ground up to handle the extreme power density, cooling, and scalability demands of accelerated computing — from AI training and inference to machine learning and blockchain. The company’s facilities feature liquid cooling, advanced power architectures, and renewable energy integration, ensuring efficiency, sustainability, and cost-effectiveness. Data centers also strategically located for access to low-cost, clean power as well as natural cooling. The company’s key advantage lies in its purpose-built design. While most traditional colocation and cloud providers retrofit existing data centers, Applied’s infrastructure is engineered explicitly for accelerated compute – offering superior power efficiency, cooling performance, and scalability. Their collaboration with ABB on medium-voltage power systems further enhances energy efficiency and operational reliability. The big story is the upcoming Polaris Forge 2 campus in North Dakota, which is a $3 billion project that will house 280 megawatts of capacity. Work on the project started in September 2025, with full operations targeted for early 2027.

Riding the AI Infrastructure Wave

The world’s biggest tech companies including Microsoft, Amazon, and Meta are projected to spend over $380 billion on AI-related capital expenditure in 2025, as they race to expand computing capacity for artificial intelligence workloads. That investment surge needs physical infrastructure to land on – and Applied Digital is likely well-placed to capture share. Unlike traditional colocation providers, Applied Digital builds, owns, and operates purpose-built AI and high-performance computing (HPC) data center campuses, engineered specifically for accelerated workloads. Instead of retrofitting existing facilities, the company constructs its campuses from the ground up and then leases capacity (measured in megawatts of critical IT load) on long-term contracts to AI hyperscalers and large enterprises.

A major example of this strategy is its partnership with CoreWeave, a leading AI cloud provider. In June, Applied signed a $7 billion lease agreement with CoreWeave, which it expanded last quarter by another 150 megawatts at the Polaris Forge 1 campus in North Dakota. This expansion lifted the anticipated contracted lease revenue to about $11 billion, locking in predictable, multi-year income tied to the AI build out.

Beyond leasing, Applied is scaling up its service layer through the Applied Digital Cloud, offering GPU-as-a-Service to enterprises that want access to advanced computing power without running their own infrastructure. In collaboration with Nvidia and Supermicro, the company deploys cutting-edge GPU servers optimized for AI and HPC workloads. related: Nvidia Stock To $350?

Valuation And Risks

While Applied’s valuation is rich, the company is likely to grow fast as its new data centers come online. See: APLD Valuation Ratios Consensus points to about 40% revenue growth for 2026 and about 80% growth for 2027. As AI workloads grow exponentially, demand for data centers optimized for GPU compute is surging, and this could drive profitability in the long run. The company’s multi-gigawatt capacity pipeline and committed anchor customers could position it as a prime beneficiary of this secular trend.

That said, risks remain. Applied is highly capital-intensive, with billions tied up in new campus builds, exposing the company to execution delays or cost overruns. Its valuation is already elevated, leaving little room for missteps. Additionally, the market for AI data center services is becoming increasingly competitive, with traditional hyperscalers and cloud providers expanding their own capacity, which could pressure margins or slow customer acquisition.

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