Applied Digital (Nasdaq: APLD) has inked a landmark $11 billion high-performance computing (HPC) hosting deal with hyperscaler CoreWeave, covering 400 MW of critical IT load capacity. The agreement places APLD in the same league as Core Scientific and TeraWulf, yet the market may still be underestimating the company's potential.
From Self-Mining to Digital Infrastructure Hosting
Headquartered in Dallas, Texas, Applied Digital has undergone a fundamental business model transformation. The company no longer operates proprietary mining rigs and has transitioned into a pure-play hosting business, serving both blockchain and HPC clients. According to its Fiscal Year 2025 report, the Cloud Services business was classified as 'held for sale' and reported under discontinued operations, leaving HPC hosting as the sole continuing segment.
The company's current operations are centered in North Dakota, with two main data center locations: Jamestown (106 MW of blockchain hosting capacity, fully utilized) and Ellendale (180 MW of blockchain hosting already online, plus a separate HPC campus called Polaris Forge 1). Polaris Forge 1 is planned to deliver 400 MW of HPC capacity to CoreWeave across three phases: the first 100 MW building service-ready by Q4 2025, the second 150 MW by mid-2026, and the third 150 MW targeted for 2027.
For the fiscal year ending May 31, 2025, Applied Digital reported $51.84 million in total revenue, consisting of $63.92 million from blockchain hosting services offset by a $12.08 million loss from discontinued Cloud Services. The HPC hosting business has yet to generate revenue. However, with construction milestones approaching and long-term leases in place, HPC is expected to become the dominant revenue driver going forward.
Inside the $11 Billion Deal: One Hyperscaler, Three Buildings, Multiple Phases
CoreWeave, the hyperscaler that made headlines in 2024 with landmark contracts with Core Scientific, is now central to Applied Digital's HPC hosting transformation. The two companies have signed three long-term leases totaling 400 MW of critical infrastructure capacity. These leases span approximately 15 years and are structured as fixed payment agreements, providing predictable revenue streams immune to market volatility. The initial announcement on June 2, 2025 covered two leases for 250 MW, projected to generate approximately $7 billion in total revenue. On August 29, 2025, CoreWeave exercised its option for an additional 150 MW building, bringing the total revenue commitment to $11 billion.
All three leases are situated at Polaris Forge 1, a campus with access to over 1 GW of potential power capacity, signaling that Applied Digital could expand well beyond the initial 400 MW under contract if additional hyperscaler clients come on board.
Financing the Buildout: Capital Raises Accelerate with Complexity
Executing large-scale leases requires significant upfront capital. As of May 31, 2025, Applied Digital held $44.9 million in unrestricted cash and equivalents. To fund the Ellendale expansion, the company raised over $874.7 million during the fiscal year, a 496% increase from the prior year. Major funding rounds included a $160 million private placement backed by NVIDIA, a $450 million convertible note, a $375 million financing facility with Sumitomo Mitsui Banking Corporation, and a multi-tranche $900 million investment commitment from Macquarie Asset Management. These were accompanied by warrant grants to CoreWeave and Macquarie, adding complexity to the capital structure.
Together, these tools provide a runway for Ellendale's buildout but also introduce dilution risk, multiple classes of preferred equity, convertible debt, and long-term lease commitments. Investors should closely monitor interest costs, dilution triggers, and warrant overhangs.
Investment Thesis: Should You Buy APLD Now?
At $14.38 per share, Applied Digital's market cap is ~$3.76 billion. Based on FY25 revenue of $51.9 million, the trailing price-to-sales multiple appears inflated at ~72.5x. However, forward projections offer context: at full buildout, CoreWeave's 400 MW could generate ~$733 million annually, plus $63 million from crypto mining hosting. Assuming a conservative 50% EBITDA margin, Applied Digital could produce ~$400 million EBITDA. Given a current enterprise value of $4.42 billion, that translates to a forward EV/EBITDA multiple of ~11.1x and an EV/revenue multiple of ~5.7x. It's not cheap, but a more grounded valuation for a business with fixed multi-year cash flow visibility.
That said, this model isn't for everyone. Applied Digital does not mine Bitcoin or hold Bitcoin, so it won't capture BTC upside like vertically integrated miners. Instead, its value lies in recurring revenue, capacity execution, and long-term lease economics. For investors seeking exposure to the HPC buildout with lower volatility and clearer cash flows, Applied Digital offers a tangible play. But for those looking for BTC leverage, better exposure may be found elsewhere.