Applied Digital (APLD) isn’t the best-performing stock in the last month, but with a 156% return, it’s close. At the time of writing, it boasts the second-best performance of mid-cap or larger stocks over that timeframe, behind CoreWeave (CRWV) (up 214%).
The company is a direct beneficiary of the AI rollout and ongoing strength in AI-focused stocks, but much of the recent performance is due to an announcement last week concerning the aforementioned CoreWeave.
On Monday of last week, it was announced that Applied Digital entered into two 15-year deals to host CoreWeave AI infrastructure at a North Dakota campus. The deal is expected to produce $7 billion in revenue over its lifetime. That averages out to $466 million a year, more than double the $221 million in trailing-12-month revenues.
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Shares of Applied rose nearly 50% on the day of the announcement, and they’re up another 37% since.
But CoreWeave is only part of the reason for the recent strength, as the company also has the backing of the most important player in the AI game: Nvidia (NVDA).
Not only does Nvidia own 7.7 million shares of Applied Digital (about 3% of the company), but it’s also granted the company “elite partner” status in Nvidia’s Partner Network, which gives Applied priority access to Nvidia’s products and makes it something of a “favored nation.”
Applied Digital (APLD): The Business
As for the company itself, Applied Digital builds scalable, liquid-cooled, AI-focused data centers near renewable energy sources.
The company’s “purpose-built facilities are engineered to unleash the power of accelerated compute and deliver secure, scalable and sustainable digital hosting, enabling CSaaS and GPU-as-a-Service solutions. Backed by deep hyperscale expertise and a robust pipeline of available power, Applied Digital accommodates AI Factories and beyond to support AI/ML, blockchain and high-performance computing (HPC) workloads.”
As you can see in the graphic below, the company primarily does business in North Dakota, with its Ellendale campus being the crown jewel.
That campus is designed to scale up over time (**Pipeline** in the Investor Presentation graphic above denotes expansion of the Ellendale campus) and is a core element of the CoreWeave deal (as well as a $5 billion investment from Macquarie Asset Management; realizing the full investment would require buildout beyond the 1GW+ above).
Given the massive ongoing buildout of AI infrastructure, investment from the biggest name in the game, and a partnership with the hottest stock on Wall Street, it’s easy to see why shares have rallied the way they have.
Applied Digital (APLD): The Stock
Applied Digital IPO’d in April of 2022, originally placing $40 million in shares at 5 per share, and quickly cratered. The post-IPO “droop” and 2022’s bear market dragged shares down to a buck before they stabilized and began base-building around 2.
Shares spent the next two years capped by the low double digits (around 10-12) with support in the 2-4 range.
But the CoreWeave news busted shares out of that range to the upside and triggered a “Golden Cross” on the weekly chart on massive volume.
Shares look to be digesting some of their recent gains, but if they hold north of their 2022-2024 highs (as they have been), there’s nothing but white space ahead of them.
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