Key Takeaways
- Applied Digital fell 31% in the past month as bets on a US rate hike hit debt-heavy AI data center builders, with Cipher Digital down 52% and CoreWeave down 24% over the same stretch.
- The slide came right after a quarter where revenue jumped 322%, and the drop looks like a chance to buy slowly.
- Interest expense of $77.4 million was more than the $65.8 million of base rent last quarter, so the stock is likely to trade on rates until rent catches up.
- Applied Digital trades at 5.7x forward sales against a 3-year average of 10.5x. The next test is the expansion leases management expects to sign by the end of 2026.
Applied Digital (APLD) stock is down 31% in the past month (through Tuesday’s close), right after a quarter where its revenue more than quadrupled. The S&P 500 rose 1% over the same stretch.
The pain hit the whole group of debt-funded companies building AI data centers as bets on a US rate hike grew. Cipher Digital (CIFR), formerly Cipher Mining, lost 52%, and CoreWeave (CRWV) fell 24%. Applied Digital’s worst days were Wednesday, Oct. 14 (down 9.4%) and Friday, Oct. 16 (down 11.5%).
A 322% quarter couldn’t stop the slide
On Oct. 7, Applied Digital reported fiscal first-quarter revenue of $341.9 million, up 322% and far above the $124.6 million analysts expected.
The next morning, Needham cut its price target to $70 from $83, keeping its Buy rating. Its point: one-time work fitting out space for tenants made up $183.5 million of the $262.6 million in HPC hosting revenue.
Chairman and CEO Wes Cummins argued that local pushback against new projects makes Applied Digital’s campuses more valuable: “we view every new restriction elsewhere as making what we already own harder to replicate.”
TIKR tracks 15 analysts on Applied Digital. How many say “Buy”?
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Rates are running the stock
The trouble is how Applied Digital pays for all that building. Its debt ran far ahead of its cash as the buildout grew, reaching $911 million against $44 million of cash and short-term investments by May 2025…
…and it’s grown a lot since. By Aug. 31, debt had reached $6.4 billion, with $3.7 billion of cash, cash equivalents and restricted cash on hand. Last quarter, its $77.4 million of interest expense topped $65.8 million of base rent.
So every bet on higher rates lands hard. On Tuesday, Oct. 13, Applied Digital fell about 5% as Cipher Digital sank 14% on an $850 million convertible note offering. By Friday, CoreWeave’s bond yields were climbing and the week’s inflation and producer-price data had added to the rate-hike bets. Applied Digital hit a 52-week low.
Monday brought a 6.7% bounce. Before the open, Goldman Sachs upgraded CoreWeave, which leases Applied Digital’s Polaris Forge 1 campus in North Dakota, to Buy. And [Form 4 filings](LINK NEEDED) showed that President Jason Zhang and Cummins had bought about $6.7 million of stock between them on Oct. 16. Zhang paid an average of $18.86 a share and Cummins paid $18.04.
Cheap for a reason, and that can change
After the slide, Applied Digital trades at 5.7x forward sales. That’s about half its 3-year average of 10.5x and a fraction of its 33x peak in October 2025.
Analysts haven’t followed the stock down. Their average target was about $65 when the stock peaked in late May, and it was still $64 on Oct. 12…
…more than three times Tuesday’s close. Even the lowest target, $22, is above it.
As of Aug. 31, Applied Digital had about 1.41 GW under lease, backing about $36 billion of revenue over the leases’ initial terms. It expects Polaris Forge 2 to take its delivered load in North Dakota to 300 MW by the end of 2026. Cummins expects to sign expansion leases by then “at materially higher pricing compared to prior leases.” Polaris Forge 3, Delta Forge 1 and Delta Forge 2 still need financing, though. The fiscal second-quarter report early next year will show how much of the revenue is rent.
My take: I’d load up slowly. The company is signing leases and turning on buildings, and the stock is priced as if the financing won’t hold. Of course, until rent comfortably covers interest, expect the stock to swing with every shift in rate bets.
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