Applied Digital (APLD): The Bull Case for AI Infrastructure Growth

Context: The Shift to AI Infrastructure

Applied Digital Corporation (APLD) has executed a major strategic transformation, moving away from cryptocurrency mining toward building next-generation data centers tailored for high-performance computing (HPC) and artificial intelligence. As of March 13th, the stock was trading at $27.05. While Yahoo Finance reported a forward P/E ratio of 526.32, bullish analysts argue that current valuations do not reflect the company's long-term growth trajectory in the rapidly expanding AI sector.

The Bull Thesis: Contracts and Capacity

The core investment argument for APLD rests on its ability to secure massive, long-term revenue streams while leveraging unique geographic advantages. Key pillars of this thesis include:

• Hyperscaler Partnerships: The company holds investment-grade contracts totaling $16 billion over 15 years with major cloud providers. These agreements provide exceptional revenue visibility and de-risk future growth.
• Strategic Locations: APLD's North Dakota facilities offer low-cost power, renewable energy integration, and ample land for mega-campus development.
• Segment Growth: The company operates three main segments:
• Data Centre Hosting: Generates strong cash flow from fully energized crypto facilities.
• HPC Hosting: Includes the Polaris Forge 1 and 2 campuses with 600 MW contracted, expanding to over 1.5 GW.
• Cloud Business: Pending a spin-out to allow management focus on core infrastructure.

Recent milestones, including "Ready for Service" completions and capital raises totaling $3.1 billion, have strengthened the balance sheet. The company is also leveraging proprietary waterless cooling technology and modular designs to capture market share in an AI data center sector projected to reach $165.73 billion by 2034.

Financial Outlook and Risks

Analysts project revenue growth from $400–500 million in FY2026 to $1.5–2.0 billion by FY2028, with significant free cash flow potential as facilities reach full capacity. The market currently implies a 50–100% upside over the next 12–24 months.

However, risks remain. These include execution challenges, customer concentration, competitive intensity, and negative cash flow during development phases. Despite these factors, the combination of operating leverage and strategic optionality (such as acquisitions or REIT conversion) makes APLD a compelling BUY for growth-oriented investors.

Historical Performance and Hedge Fund Sentiment

This bullish perspective echoes a December 2024 thesis by DoU92, which highlighted APLD's pivot to AI. Since that coverage, the stock price has appreciated by approximately 184.13%. RA_Capital reinforces this view but places greater emphasis on long-term contracts and financial de-risking.

Regarding institutional interest, Applied Digital Corporation is not currently listed among the "40 Most Popular Stocks Among Hedge Funds." Database records show that 40 hedge fund portfolios held APLD at the end of the fourth quarter, an increase from 38 in the previous quarter. While acknowledging the stock's potential, some analysts suggest other AI stocks may offer higher returns in shorter timeframes.

Takeaway

Applied Digital Corporation represents a high-conviction play on the AI infrastructure boom, backed by $16 billion in long-term contracts and aggressive expansion plans. While valuation metrics appear stretched and execution risks persist, the projected revenue surge to $2 billion by FY2028 suggests substantial upside for investors willing to bet on the company's transition from crypto mining to HPC leadership.