Can Applied Digital’s latest AI lease and billion-dollar financing push justify APLD’s explosive premarket surge?
What Does the Delta Forge 2 Deal Mean for Wall Street?
Applied Digital Corp. confirmed a binding 15-year Applied Digital AI Lease with an unnamed U.S.-based investment-grade hyperscaler — the same customer behind Delta Forge 1 and Polaris Forge 3. The agreement covers 210 MW of critical IT load and locks in $5.2 billion in base-term revenue, rising to $12.7 billion if all renewal options are exercised. This marks Applied Digital Corp.’s fifth AI Factory campus lease, expanding its total contracted portfolio to 1.4 GW of IT load and 2.15 GW of grid-connected utility power. Notably, 70% of its contracted revenue now comes from U.S. investment-grade tenants — a key differentiator versus smaller colocation providers facing credit risk in today’s tighter liquidity environment.
How Does the $1.59B Note Offering Fit In?
Hours after the lease announcement, Applied Digital Corp. revealed its subsidiary APLD ComputeCo 3 LLC intends to raise $1.59 billion in senior secured notes due 2031. The proceeds will fund construction of ELN-04 — the fourth building at Polaris Forge 1 in Ellendale, North Dakota — delivering 150 MW of AI-optimized IT capacity. Funds will also repay a Goldman Sachs bridge loan and cover debt service reserves. The offering, structured under Rule 144A and Regulation S, reflects Applied Digital Corp.’s shift toward project-level financing — a strategy increasingly adopted by infrastructure players like DigitalBridge and Keppel DC. Analysts at Craig-Hallum, which recently raised its price target to $75, called the financing ‘a disciplined capital deployment step aligned with multi-year lease visibility.’
How Does Applied Digital Corp. Compare to AI Infrastructure Peers?
While Apple and Meta build proprietary AI infrastructure, Applied Digital Corp. fills a critical niche: third-party, hyperscaler-grade colocation with sustainability and power scalability baked in. Its 2.15 GW of grid-connected power dwarfs most U.S. data center REITs — including Equinix (EQIX) and Digital Realty (DLR) — which remain focused on general-purpose workloads. Unlike legacy players, Applied Digital Corp. signs take-or-pay leases before construction begins, de-risking revenue. That model has attracted strong investor interest: shares are up 180% over the past 12 months, outpacing the NASDAQ Composite (+28%) and the S&P 500 (+19%). Lake Street recently upgraded its rating to Buy and lifted its price target to $70, citing ‘unmatched execution velocity in AI capacity delivery.’
What’s the Risk Profile for U.S. Investors?
Two years ago, we made a deliberate decision to build a company that scales, not just builds data centers. Continued demand from leading hyperscalers across five campuses is strong validation of our model.— Wes Cummins, CEO of Applied Digital Corp.
Despite strong leasing momentum, Applied Digital Corp. faces near-term scrutiny on balance sheet leverage. Foreign Policy Journal flagged it as a ‘high-risk cash-burning stock’ due to negative free cash flow and aggressive capital deployment. However, the company’s $350 million revolving credit facility — arranged by Goldman Sachs Lending Partners LLC — and its $1.59 billion notes offering suggest institutional lenders remain confident. Importantly, the Delta Forge 2 lease includes a ‘step-up’ clause tied to GPU architecture milestones — a structural hedge against obsolescence risk. With 70% of revenue backed by investment-grade tenants, Applied Digital Corp. is better positioned than many AI hardware or chip stocks — including NVIDIA — to weather macro volatility driven by Treasury yields or Fed policy shifts.
