Applied Digital has surged roughly 540% over the past 12 months, driven by investor excitement around AI data center capacity. Despite this meteoric rise, the company remains unprofitable and carries a valuation equivalent to 19 times projected revenue for next year. Its ambitious expansion plans—including the build-out of four new hyperscale facilities—are expected to cost over $3 billion in capital expenditures through 2027, raising concerns about leverage and cash burn among more conservative market participants.

Shares of Applied Digital jumped 14.3% in a single session after Nvidia committed $2 billion to CoreWeave, one of Applied Digital’s top customers. This infusion is seen as a partial credit enhancement: CoreWeave’s enhanced balance sheet reduces the risk that it will default on its long-term facility leases. While the move reassures some investors about counterparty strength, analysts caution that Applied Digital’s reliance on a small number of heavily leveraged clients still leaves it exposed to sector downturns.

Management projects annual revenue growth exceeding 100% over the next two years, backed by rising guidance issued in January. The company is reportedly negotiating a potential $10 billion hyperscaler contract that could add more than $1 billion in annualized bookings if finalized. Execution risks remain high—particularly around permitting delays and supply-chain constraints for critical power and cooling systems—but successful closing of such an agreement would represent a transformational milestone for Applied Digital’s scale and profitability runway.