Key Points
Applied Digital surged after CoreWeave expanded its AI computing lease, pushing the total contract value to $11 billion.
The lease announcement prompted analysts at Citizens to raise APLD’s price target, reflecting bullish near-term sentiment amid rising AI infrastructure demand.
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Shares of Applied Digital (NASDAQ: APLD) jumped on Thursday, finishing the day up 31%. The huge spike came as the S&P 500 and Nasdaq Composite lost 0.4% and 0.1%, respectively.
The Bitcoin miner-turned artificial intelligence (AI) cloud computing provider reported its second-quarter earnings. Despite somewhat mixed results, it was revealed that another major cloud provider intends to lease additional compute power.
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Applied Digital gets a big win
Applied Digital announced that its partner CoreWeave exercised a lease option for an additional 150 MW of computing power, bringing the total contract value to $11 billion. This is the maximum the company can provide from its Ellendale, North Dakota, location.
The analyst Greg Miller of Citizens maintained his buy rating on the stock after the news and raised his price target to $16.
Big tech continues its AI spend
The news comes as major AI players in big tech like Meta Platforms and Microsoft release their earnings results, showing no signs of reining in their AI capital expenditures (capex). Quite the opposite.
Image source: Getty Images.
Meta nearly doubled its capex year over year while Microsoft grew its capex by 22% to $17.1 billion and plans to increase that to $30 billion this quarter. That figure was 60% more than analysts expected.
Applied is growing fast, but the future is uncertain
While I think the company will continue to perform well in the near term, I have significant concerns about the business model long-term. The Metas and Microsofts of the world may be leaning on specialty cloud providers at the moment to keep up with the rapid growth of AI demand, but they are also heavily investing in building their own facilities. I don’t see a strong moat for Applied Digital that makes me think this is a long-term hold.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
