A data-center stock is up more than 50% today after sealing a lucrative AI partnership

Applied Digital (APLD) shares jumped as much as 54% following the announcement of two 15-year lease agreements with CoreWeave, an Nvidia-backed AI cloud services firm, projected to generate $7 billion in revenue. The deal provides CoreWeave with 250 megawatts of data center capacity, with an option for an additional 150 megawatts, solidifying Applied Digital's position in AI and high-performance computing infrastructure. Analysts suggest this agreement could attract other enterprise AI clients, potentially including OpenAI, further driving demand for Applied Digital's data center services.

Analysis

Applied Digital (APLD) shares experienced a significant intraday surge of up to 54%, closing 48% higher at $10.14, following the announcement of two 15-year lease agreements with Nvidia-backed AI cloud services firm CoreWeave. These agreements are projected to generate a substantial $7 billion in revenue for Applied Digital over their term. The deal grants CoreWeave 250 megawatts of data center capacity at an Applied Digital campus in North Dakota, with an option for an additional 150 megawatts. This development is a major strategic win for Applied Digital, particularly as it progresses with its conversion into a data center real estate investment trust (REIT), and it strongly positions the company as an emerging provider of critical infrastructure for the rapidly expanding artificial intelligence and high-performance computing sectors. The agreement underscores the immense demand for data center capacity from AI hyperscalers. Analyst commentary, such as a note from Needham, suggests this deal could attract other enterprise AI customers to Applied Digital and speculates that OpenAI might be an ultimate end-user, given its prior $4 billion deal with CoreWeave. The overall sentiment surrounding this news is extremely positive, reflecting the transformative potential of this long-term contract for Applied Digital's financial outlook and market standing.

Key Decisions for Investors

• Investors should evaluate the long-term revenue visibility and enhanced financial stability provided by the $7 billion, 15-year CoreWeave contract for Applied Digital, considering its impact on the company's valuation.
• Monitor Applied Digital's execution of this large-scale lease and its ongoing transition into a data center REIT, as well as its ability to secure further contracts from other enterprise AI clients, which could serve as additional growth catalysts.
• Given the substantial share price increase, assess the current risk/reward profile, considering the execution risks associated with scaling operations to meet the contract demands and the competitive landscape for AI data center providers.