Applied Digital Locks $16B of 600 MW AI Data Center Leases, Eyeing 5 GW Expansion
Applied Digital shares have surged nearly 300% over the past year but remain 13% below their 52-week high following a $19 million fiscal Q2 net loss. The company has secured $16 billion in 15-year lease agreements for 600 MW of AI data center capacity, plans to invest over $6 billion to build it, and targets 5 GW total capacity within five years.
1. Volatility and Recent Financial Performance
Applied Digital shares surged nearly 300% over the past year, driven by rapid expansion of its AI data centers. After hitting a 52-week high in mid-October, the stock has retraced by roughly 13%. The company’s fiscal second quarter, ended November 30, delivered a net loss of $19 million, an improvement from a one-year-prior loss of $32 million. Revenue for the quarter climbed 45% year-over-year as lease contracts for new capacity began contributing to top-line growth.
2. Accelerating AI Data Center Build-Out
Applied Digital is constructing two North Dakota campuses, representing 600 megawatts (MW) of AI-optimized capacity under long-term lease agreements with hyperscalers and neocloud providers. The first 100 MW facility is operational after a $1 billion investment, and management projects total construction spend exceeding $6 billion for the 600 MW build-out. According to McKinsey forecasts, AI workloads in data centers will grow 3.5× between 2025 and 2030, underpinning robust demand for Applied Digital’s fit-out and lease services.
3. Long-Term Revenue Visibility and Profit Potential
Signed leases on the 600 MW portfolio imply potential lease revenues of $16 billion over the next 15 years, equating to approximately $25 million per MW. Construction costs range from $11 million to $13 million per MW, suggesting significant margin expansion once full capacity is online. The company controls or has rights to develop 4.3 GW of additional capacity and targets 5 GW total within five years. Management emphasizes modular designs and prefabricated components to accelerate delivery and reduce per-MW costs.
4. Valuation Considerations and Investor Implications
Applied Digital trades at 33 times forward revenue, reflecting lofty growth expectations in a market where Goldman Sachs forecasts data center demand will exceed supply by 10 GW annually over the next three years. As hyperscalers and infrastructure providers compete for scarce AI-optimized space, Applied Digital’s integrated build-and-lease model positions it to capture outsized share. Investors with multi-year horizons should weigh near-term volatility against the company’s long-duration lease contracts and expanding capacity footprint.