The data center sector is undergoing significant evolution, largely driven by the increasing demand for artificial intelligence (AI) and cloud services. Applied Digital (NASDAQ: APLD) is emerging as a key player, boasting impressive growth this year due to high market demand.
Major Growth and Partnerships
Applied Digital has seen its stock price soar by 265% year to date. This surge reflects the company’s promising growth trajectory, particularly in the AI data center segment.
A critical component of this growth is the company’s substantial contract with CoreWeave. This agreement, valued at $7 billion over 15 years, allows CoreWeave access to 400 megawatts of capacity from Applied Digital’s Polaris Forge 1 campus in North Dakota. As the demand for data center capacity escalates, further partnerships are anticipated.
Energy Demands of AI Data Centers
The power requirements for AI data centers present both a challenge and an opportunity. According to Deloitte, these centers in the U.S. are projected to use over 100 gigawatts of power by 2035. This staggering demand could place strain on the existing power grid.
As AI and cloud services continue to expand, hyperscalers will require all available power from data centers like those built by Applied Digital. The company’s rapid expansion plans include the Polaris Forge 2 site, which aims to provide 300 megawatts initially, with future growth potential up to 1 gigawatt.
Investment Potential
Applied Digital is targeting $1 billion in net operating income over the next five years. Given its current market capitalization of $8 billion, many analysts consider it undervalued if the company can successfully execute its ambitious development plans.
For investors considering a long-term position, the prospects appear promising. However, potential investors should also weigh other options aggressively promoted by analysts.
Alternatives to Consider
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In summary, while Applied Digital is positioned for substantial growth due to the increasing demand for AI data centers, investors should consider various options within the market. The recommended stocks by expert analysts may offer alternative investment opportunities with potentially significant returns.
