What Happened?
Shares of digital infrastructure provider Applied Digital (NASDAQ: APLD) jumped 51% in the afternoon session after it signed two long-term lease agreements for artificial intelligence data centers with Nvidia-backed AI hyperscaler CoreWeave. APLD is expected to deliver 250 megawatts (MW) of power for CoreWeave's AI and high-performance computing (HPC) infrastructure at its North Dakota data center campus.
The bigger takeaway is financial: across the 15-year term, these contracts are expected to generate about $7 billion in revenue, providing significant long-term financial visibility for Applied Digital.
The stock's reaction suggested investors viewed the deals as both a reliable new stream of recurring income and a clear signal that Applied Digital is well positioned in the rapidly expanding AI-data-center space.
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What The Market Is Telling Us
Applied Digital’s shares are extremely volatile and have had 117 moves greater than 5% over the last year. But moves this big are rare even for Applied Digital and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was about 2 months ago when the stock dropped 30.8% on the news that the company reported weak first-quarter 2025 (fiscal Q3) results, which significantly missed Wall Street's sales expectations.
A key issue was just how much money the company lost during the quarter as it burned through a lot more cash, given its poor profit margin.
Now, to be fair, revenue did grow 22% from last year, mostly because cloud services sales grew over 200%. But the cloud business actually shrank compared to the previous quarter because they switched how they lease out GPUs. Hosting sales also dipped, exposing further challenges in that segment.
Looking ahead, the company offered no definitive sales guidance and revealed plans to divest its Cloud Services unit, raising uncertainty about near-term growth.
Additionally, tariff-related concerns cast doubt on the sourcing of components for the data center hosting business. Overall, this was a weak quarter, highlighting significant issues.
Applied Digital is up 31.2% since the beginning of the year, and at $10.23 per share, it is trading close to its 52-week high of $10.68 from November 2024. Investors who bought $1,000 worth of Applied Digital’s shares 5 years ago would now be looking at an investment worth $113,667.
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