Applied Digital: A Data Center Bet

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So, artificial intelligence. It’s everywhere, isn’t it? Promises to revolutionize everything from cat videos to, well, everything. What’s often overlooked in all the breathless pronouncements is that this stuff needs power. And not just a little. We’re talking about an insatiable appetite for electricity that makes a teenager’s snack cravings look positively restrained. Traditional data centers, bless their cotton socks, simply weren’t designed for this level of demand. It’s a bit like trying to run a Formula One car on a bicycle pump.

Enter Applied Digital (APLD +5.46%). They’ve rather cleverly positioned themselves as builders of these…well, let’s call them ‘AI hotels’ – enormous, high-tech data centers specifically geared towards housing the computational needs of this burgeoning artificial world. The company is betting big, and expects a frankly astonishing amount of growth as these facilities come online over the next few years. Which leads to the inevitable question: could investing in this company today actually turn you into a millionaire? It’s a tempting thought, isn’t it? Though, as my grandmother used to say, if something sounds too good to be true…

Cashing in on the AI Data Center Boom

Applied Digital didn’t start with AI, interestingly enough. They began their life in the rather more volatile world of cryptocurrency, building data centers dedicated to Bitcoin mining. Which, if you recall, was all the rage for a while. But when hundreds of billions of dollars began flowing into AI data centers, and the demand for high-performance computing infrastructure started to outstrip supply, they wisely pivoted. McKinsey & Company estimates that total data center expenditures could reach a staggering $7 trillion by 2030, with AI gobbling up the lion’s share. That’s a lot of servers. And a lot of electricity bills.

Currently, Applied Digital is constructing two new AI data center campuses – Polaris Forge 1 and Polaris Forge 2 – with capacities of 450 megawatts (MW) and 300 MW respectively. Just to put that in perspective, one megawatt can power roughly 750 homes. They’ve also begun work on Delta Forge 1, another campus with an initial capacity of 430 MW. These aren’t small undertakings. It’s a bit like building small cities, only instead of people, they house blinking lights and humming fans.

The revenue potential is, shall we say, considerable. Applied Digital has already secured lease deals with CoreWeave totaling $11 billion in revenue over 15 years. They’ve also landed a lease agreement worth approximately $5 billion over 15 years with another AI company, which they’re currently keeping under wraps. It’s always a little mysterious, isn’t it, when companies are secretive about their clients? Makes you wonder what they’re up to.

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Is Applied Digital a Millionaire Maker?

All this excitement has, unsurprisingly, sent the company’s share price soaring. The stock has jumped by a remarkable 700% over the past 18 months, pushing the company’s market capitalization to $9.5 billion. That’s quite a run. Though, as any seasoned investor will tell you, past performance is never a guarantee of future results. It’s a bit like saying you’re a good driver because you successfully navigated your driveway.

Wall Street analysts predict that Applied Digital will generate approximately $346 million in revenue in its fiscal 2026, which ends May 31, and $535 million in fiscal 2027. This means the stock currently trades at 17 to 18 times next year’s revenue estimates. Which, let’s be honest, is a fairly hefty price tag.

The company is currently burning through cash to fund all this construction, relies heavily on a few large deals, and would be in a rather precarious position if AI investments were to falter. It’s a high-risk, high-reward scenario. A bit like trying to ride a unicycle across a tightrope.

Anyone who invested in Applied Digital 18 months ago made a substantial profit. Congratulations to them. However, that particular train has left the station, and it seems unlikely that new investors will enjoy similar returns. The opportunity, it appears, has largely passed. Still, it’s a fascinating company, and a compelling example of how the relentless march of technology is reshaping the world around us. And that, if nothing else, is something to ponder.

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2026-02-04 09:12