Key Takeaways
- Applied Digital fell 15% today after Texas’s governor-elect pledged to halt new data center approvals.
- Its signed leases sit outside Texas, yet it fell with TeraWulf and other data center stocks.
- It trades at less than half its 3-year average sales multiple.
- Its real risk is funding: $6.4 billion of debt, with about 800 MW still to finance.
Applied Digital (APLD) sank 15% today in a second day of data center selling. Texas Governor-elect Gina Hinojosa has pledged to halt new data center approvals until the state adopts rules protecting residents from higher electricity and water costs.
TeraWulf (WULF) fell 14%.
TIKR tracks 16 analysts on Applied Digital. How many say “Buy”?
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Wrong state, same selloff
Bernstein analyst Gautam Chhugani expects no quick fix: “We would expect the data center pause to continue and any data center potential legislation to remain in gridlock.”
CleanSpark (CLSK), down 17%, and MARA Holdings (MARA), down 14%, carry the real Texas risk. KBW downgraded CleanSpark on Wednesday and cut the odds it gives its Sealy and Brazoria sites in Texas to 50%. MARA’s planned 2,000 MW at Matagorda still needs approval from ERCOT. For them, a long pause stalls growth.
TeraWulf agreed in August to sell its 50.1% stake in the Abernathy joint venture for about $530 million, and its growth now runs through a 20-year Anthropic lease in Kentucky worth about $19 billion. If a company leaving Texas can’t dodge this selloff, a North Dakota address won’t save Applied Digital either.
Applied Digital’s only Texas project is a planned 50 MW site in Briscoe County. Its 1,410 MW of signed leases sit in North Dakota, Louisiana and Alabama. As those campuses come online, analysts expect revenue to more than triple, from $611 million in fiscal 2026 to $1.97 billion in fiscal 2028:
Texas can’t touch those campuses, so I wouldn’t expect these estimates to fall.
CEO Wes Cummins argued in October’s results release: “we view every new restriction elsewhere as making what we already own harder to replicate.”
Before today’s drop, the stock traded at 4.7x forward sales, less than half its 3-year average of 10.6x:
At today’s price, it’s closer to 4x.
Debt is the bigger risk
In the quarter ended Aug. 31, interest expense of $77.4 million topped $65.8 million of base rent, and debt reached $6.4 billion. Cummins has said about 800 MW still needs financing over the next year.
If the debt for its next three campuses prices below the 9.25% notes it sold last November, Cummins’ case gets a lot stronger. Of course, if lenders charge more after this week, today’s discount may be deserved.
So what is Applied Digital stock actually worth?
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