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Applied Digital: Now the High-Stakes Race to Build Begins

By: MarketBeat

June 17, 2025 at 13:02 PM EDT

Applied Digital Data Center - This image is an original composition by MarketBeat using licensed and editorial elements. Not for redistribution or reuse.

The artificial intelligence (AI) revolution has ignited a modern gold rush, not for precious metals, but for the vast digital infrastructure required to power it. In this high-stakes environment, Applied Digital Corporation (NASDAQ: APLD) has made a bold pivot to position itself as a key contender. This strategic shift has captivated investors, fueling significant stock price volatility and placing the company under an intense spotlight.

For Applied Digital, the narrative is no longer just about having a promising strategy; it has evolved into an urgent and demanding race of operational execution.

Locking in the Cornerstone Deal

Applied Digital has already proven it can compete at the highest level by clearing a massive initial hurdle. In early June 2025, the company secured a game-changing, long-term agreement with CoreWeave (NASDAQ: CRWV), a prominent AI Hyperscaler backed by industry leader NVIDIA (NASDAQ: NVDA). This deal serves as the cornerstone of Applied Digital's current valuation and its entire AI-focused strategy.

Under the agreement, Applied Digital will lease 250 megawatts (MW) of datacenter capacity to CoreWeave at its campus in Ellendale, North Dakota. The partnership, built on two separate leases, spans approximately 15 years. Over that term, the deal is projected to generate roughly $7 billion in revenue for Applied Digital.

This figure provides a powerful, long-term revenue anchor that significantly de-risks the company's business model and justifies a re-rating of its stock by the market.

Applied Digital’s Race Against the Clock

With a foundational contract signed, Applied Digital's focus shifts entirely to the challenge of delivering on its promises. The company now faces an operational gauntlet where success will be measured in timelines met and budgets managed. The key hurdles that will determine its future are clear:

Construction Timelines: The most pressing task is the physical build-out of its datacenter campus. Applied Digital must meet demanding deadlines, with the first 100 MW facility for CoreWeave expected to be ready for service in the fourth quarter of calendar 2025. Any delays could impact revenue and investor confidence.
Capital Management: This capital-intensive construction requires careful financial oversight. The company currently has a debt-to-equity ratio (D/E) of 1.22. A recent S-3 "shelf registration" filing gives Applied Digital the flexibility to raise additional capital, but this also introduces the risk of diluting the value of existing shares.
Operational Complexity: AI data centers are far more complex than traditional facilities. Sourcing enormous amounts of power and deploying advanced technologies requires specialized expertise. The recently announced partnership with ABB (NYSE: ABBNY) to enhance power efficiency is a direct and necessary step toward tackling this challenge.

Applied Digital Is Running in a Crowded Field

Applied Digital is not running this race alone. While the company currently has momentum, it also knows that its competitors are not far behind.

The data center market is attracting massive investment from established real estate investment trusts (REITs) and tech giants, who are aggressively expanding their capacity.

While Applied Digital's specialized focus and agility offer a competitive advantage, it operates on a different scale than its rivals, which have larger capital reserves.

This intense competitive pressure underscores the urgency for the company to execute its projects flawlessly.

In the AI infrastructure space, both now and in the future, market share will be won by companies that can deliver the highest quality capacity in the shortest timeframe.

The Investor Tug-of-War

The combination of massive potential and significant risk has turned Applied Digital into a classic battleground stock. This conflict is best illustrated by examining Applied Digital's high short interest, which stood at 39.55% of its available shares, or float, as of the last reporting period. This means a significant number of traders are betting the price will fall.

The bull and bear cases are clearly defined.

Bullish investors focus on the secured $7 billion revenue stream from CoreWeave and Applied Digital’s prime position in the AI boom. Meanwhile, bearish investors focus on execution risks, the company's current lack of profitability, and the negative sentiment sparked by news that CoreWeave had sold its separate equity stake in the company.

This investor tug-of-war directly contributes to the stock's high beta of 6.08, indicating a potential for significant future price fluctuations in Applied Digital’s stock.

Applied Digital’s Finish Line Is Profitability

Applied Digital has successfully navigated the first lap of its strategic pivot and secured a contract validating its place in the AI infrastructure race. However, the company's focus, and that of most retail investors, must now shift to watching the race's second lap, where Applied Digital has the demanding task of operational execution.

The finish line is no longer just a signed contract. Applied Digital must now achieve sustained and profitable operations. The ability to transform construction schedules and lease agreements into tangible cash flow will ultimately determine the winners in this high-stakes race and dictate the long-term trajectory of Applied Digital's stock.

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