-
Earlier this month, Applied Digital announced that its subsidiary priced a US$2.35 billion private offering of 9.250% senior secured notes due 2030 to fund construction and expansion of two major data centers at the Polaris Forge campus in Ellendale, North Dakota, while also planning to draw US$787.5 million from a perpetual preferred equity facility with Macquarie Asset Management.
-
This large-scale debt and equity financing introduces significant new financial leverage and potential share dilution, reflecting the scale and capital demands of Applied Digital’s push into AI and HPC data center infrastructure.
-
We’ll examine how the company’s ambitious use of debt and equity to accelerate data center growth impacts its investment narrative.
The best AI stocks today may lie beyond giants like Nvidia and Microsoft. Find the next big opportunity with these 26 smaller AI-focused companies with strong growth potential through early-stage innovation in machine learning, automation, and data intelligence that could fund your retirement.
To hold Applied Digital shares today, you must believe that its aggressive expansion into AI and high-performance computing (HPC) data centers will lead to sustained growth and secure major long-term contracts, outweighing substantial financial and operational risks. The recent US$2.35 billion debt and US$787.5 million equity financing were critical steps to fund this buildout, but do not materially change the most important short-term catalyst: successfully ramping capacity to meet existing hyperscaler contracts. The biggest risk remains execution under increasing financial leverage and customer concentration exposure.
Among recent announcements, the finalized 15-year, US$5 billion lease with a leading U.S. hyperscaler stands out as highly relevant. This agreement both supports the scale of planned data center investments and highlights the importance of delivering new capacity on time to underpin future revenue predictability–the core driver for Applied Digital’s current valuation. Despite these partnerships, investors should also be mindful of the elevated balance sheet risks and what could happen if growth assumptions are not met…
Read the full narrative on Applied Digital (it’s free!)
Applied Digital’s narrative projects $755.7 million in revenue and $102.2 million in earnings by 2028. This requires 73.7% yearly revenue growth and a $263.2 million increase in earnings from -$161.0 million today.
Uncover how Applied Digital’s forecasts yield a $43.70 fair value, a 85% upside to its current price.