Why Applied Digital Stock Was a Major Winner on Wednesday
Key Points
The facility will use power from a nearby wind farm for some of its electricity.
Compounding this positive development, an analyst reinstated coverage of the stock with a buy recommendation.
- 10 stocks we like better than Applied Digital ›
Applied Digital (NASDAQ:APLD) was a company and stock on the move Wednesday. The artificial intelligence (AI) data center operator's equity rose largely on the back of a new development contract it signed with a peer. Adding to this was a rather bullish new research note from an analyst. On a day when the S&P 500 index rose by 0.5%, Applied's stock ended the trading session almost 9% higher.
Partnering up
Before market open, green data center developer Soluna Holdings (NASDAQ:SLNH) announced that it and Applied have agreed to form a joint-venture company. That entity, which doesn't yet have a name, will build a planned 50-megawatt, next-generation data center near Soluna's Dorothy 3 development site in Texas. It will be powered, in part, by a nearby wind farm.
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Applied is expected to hold 51% of the joint venture, with Soluna owning the remainder. Under the terms of their deal, Soluna will contribute the necessary land and power-related project assets, while Applied will supply capital.
The joint venture agreement is subject to a set of conditions and approvals, including a tax abatement granted by the county where the project will be located. The agreement between the companies is expected to be completed by the end of this year.
The project already has a tenant; Soluna said that ChronoScale Holdings, an accelerated compute platform majority-owned by Applied, has signed a non-binding letter of intent to lease the data center.
An analyst returns
Separately, Roth/MKM's Bryan Baratian reinstated his coverage of Applied. He's firmly in the bull camp with the stock, as he flagged it as a buy at a price target of $35 per share. This is a robust 67% above its latest closing price.
Applied continues to set itself apart from the clutch of former and current crypto businesses pushing deep into the AI data center space. Earlier this month, it announced it reached ready-for-service status at a facility in North Dakota, so at this point it's building significant momentum in this potentially very lucrative business. I'd say its stock is definitely worth considering as a buy.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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