A Look At Applied Digital (APLD) Valuation After Nvidia Backed CoreWeave Lease Agreements

CoreWeave leases put Applied Digital’s AI data centers in focus

Applied Digital (APLD) is back on investors’ radar after securing long-term lease agreements with Nvidia backed CoreWeave for its AI focused data centers, a development that is drawing attention despite recent share price volatility.

See our latest analysis for Applied Digital.

Recent trading has been choppy, with the share price falling 8.0% in the last session and 12.2% over the past week, yet still showing a 24.1% 1 month share price return and a very large 1 year total shareholder return that signals strong underlying momentum around the CoreWeave leases and Applied Digital’s AI data center exposure.

If you are assessing how AI infrastructure opportunities are shaping up beyond Applied Digital, it can be useful to scan 43 AI infrastructure stocks for potential ideas across the broader space.

With Applied Digital posting a very large 1 year total shareholder return, double digit recent losses and contracts that lift revenue visibility, the key question is simple: is the stock still mispriced, or is the market already accounting for future growth?

Most Popular Narrative: 25.9% Undervalued

Applied Digital’s most followed narrative pegs fair value at $52.80 versus a last close of $39.14, putting a spotlight on how firmly the CoreWeave and other hyperscaler leases are baked into those assumptions.

The company has recently secured long-term (15-year) leasing agreements with CoreWeave, a major AI hyperscaler, for its purpose-built AI/HPC data center campus, Polaris Forge 1, representing a total of $7 billion in contracted revenue and a multi-year, recurring, and predictable revenue stream that directly supports future revenue growth and cash flow stability.

Read the complete narrative.

Curious what kind of revenue curve and margin profile need to sit behind that 15 year lease stack to justify the fair value uplift? The most popular narrative leans on aggressive top line expansion, a sharp swing from losses to profitability, and a rich future earnings multiple usually reserved for mature software leaders. Want to see exactly which growth and margin assumptions have to land for that to hold up?

Result: Fair Value of $52.80 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the narrative also leans heavily on a small group of large hyperscaler and crypto linked customers, while Applied Digital carries sizeable debt that could strain cash flows if assumptions slip.

Find out about the key risks to this Applied Digital narrative.

Another View: Rich Sales Multiple Raises The Bar

The narrative fair value of $52.80 frames Applied Digital as 25.9% undervalued, but the current P/S of 35x tells a tougher story. That is far above the US IT industry at 2.2x and above a fair ratio of 21x, which points to a lot already priced in. With that kind of gap, are you comfortable with how much needs to go right?

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If the mix of enthusiasm and concern in this story feels familiar, that is the point. Strong opinions exist on both sides, and you should pressure test them against the 1 key reward and 4 important warning signs.

Looking for more investment ideas?

If Applied Digital has you thinking about what else could be worth your attention, now is the time to scan a few focused stock lists before the next move.

• Target potential value opportunities by reviewing companies in the 52 high quality undervalued stocks that combine attractive pricing with solid fundamentals.
• Prioritize resilience by checking out the 65 resilient stocks with low risk scores to see stocks that score well on financial strength and volatility screens.
• Spot lesser known opportunities early by scanning the screener containing 21 high quality undiscovered gems that highlight companies with underfollowed yet robust profiles.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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