Think It's Too Late to Buy Applied Digital Stock? Here's the 1 Reason Why There's Still Time.
Key Points
Applied Digital stock is up big because of demand for its AI data centers.
Lease agreements with CoreWeave and another hyperscaler are worth approximately $16 billion over the next 15 years.
Data center spending is expected to grow, and this should lead to more massive contracts for Applied Digital.
- 10 stocks we like better than Applied Digital ›
Data centers are in high demand due to the growth of artificial intelligence (AI), and Applied Digital (NASDAQ: APLD) has benefited from that. The company, which builds and operates data centers, has seen its share price increase 269% on the year (through Dec. 1).
That kind of outsized growth sometimes scares off investors, who don't want to buy at the peak. But Applied Digital could still have plenty of room to run. Here's why.
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A growing number of high-value lease agreements
Applied Digital has signed contracts with multiple hyperscalers this year. CoreWeave signed two 15-year lease agreements in June, and Applied Digital anticipated about $7 billion in revenue from those deals. In August, Applied Digital and CoreWeave finalized another lease agreement, bringing the projected revenue to $11 billion.
In October, Applied Digital announced another 15-year lease agreement, this one with a U.S.-based hyperscaler and worth approximately $5 billion in revenue. Between the two deals, Applied Digital is expected to generate $16 billion in revenue over the next 15 years. Over $1 billion per year in earnings is a sizable addition for a company that reported $219 million in revenue over the trailing 12 months.
Applied Digital continues to increase its data center capacity, and it has become more efficient with its building process, reducing timelines from 24 months to between 12 and 14 months. AI companies are investing heavily in data centers, with spending projected to reach $1.1 trillion in 2029. Investors will likely see Applied Digital sign more major lease agreements in 2026, and its stock is a good candidate to keep outperforming the market.
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Lyle Daly 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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