Key Takeaways
- Applied Digital fell 18% in the week to Nov. 4, hitting a new 52-week low. CoreWeave and other AI data center stocks also sold off on Big Tech’s spending reports, worries about financing, and the midterm results.
- CEO Wes Cummins said the company still has to finance about 800 MW over the next 12 months, and its quarterly interest expense is already higher than the base rent it collects.
- Analysts still expect revenue to more than triple from fiscal 2026 to fiscal 2028 on signed leases, but the stock trades at less than half its usual multiple of forward sales.
- The stock looks worth buying slowly. CoreWeave’s Nov. 10 report and Applied Digital’s January report are the next tests.
Applied Digital (APLD) stock fell 18% from its Oct. 28 close to $16.61 on Wednesday, Nov. 4, after touching a fresh 52-week low of $16.06 during the session. CoreWeave (CRWV), the tenant at its first North Dakota campus, lost 24% over the same stretch, and neoclouds IREN and Nebius fell about as hard.
In the middle of the slide, Applied Digital’s own CEO put a number on how much of its buildout isn’t paid for yet.
Big Tech’s earnings started the slide
After the close on Oct. 28, Microsoft reported capital spending below forecasts and blamed delays in third-party capacity it had under contract. CFO Amy Hood tied those delays to GPU-as-a-service providers, which is what neoclouds sell.
A day later, Amazon’s results showed AI spending pushing its trailing free cash flow deeper into the red, and Intel’s results added to the selling. Before Friday’s open, B. Riley cut its Applied Digital target to $51 from $75, keeping its Buy rating.
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The CEO put a number on the funding gap
The group was already on edge after Elon Musk warned on X in late October that more than 200 neoclouds face “guppy-level death and consolidation.”
Asked about that warning on CNBC’s Squawk on the Street on Monday, Nov. 2, CEO Wes Cummins pushed back on the label. “I wouldn’t put us in the neo cloud class,” he said. “We’re building data centers. We’re effectively a highly technical real estate business. Long-term leases, high-quality tenants.”
But Cummins also said Applied Digital has financed about 600 MW of its 1.4 GW plan and needs funding for roughly 800 MW more over the next 12 months. He said the tenants behind that capacity are rated AA or better, and that the bond market is “still available for us,” at a price.
Shares now trade below the roughly $18 to $19 that Cummins and President Jason Zhang paid when they bought about $6.7 million of stock on Oct. 16.
The leases haven’t gone anywhere
As of Aug. 31, Applied Digital had about 1.41 GW leased across five campuses, worth about $36 billion over their initial terms. On those leases, analysts expect revenue to more than triple from fiscal 2026 to fiscal 2028:
Yet the stock fetched just 4.7x forward sales at Monday’s close, under half the roughly 11x it has averaged over three years:
Wall Street’s average price target was $62 on Oct. 27, more than triple Wednesday’s close.
Rent still trails the interest bill
Interest expense climbed fast through fiscal 2025 as Applied Digital borrowed to build:
And it’s jumped since. In the quarter to Aug. 31, interest expense hit $77.4 million. That’s more than twice fiscal 2025’s total and more than the $65.8 million of base rent it collected. Debt reached $6.4 billion.
CoreWeave is a second pressure point. It accounts for about 30% of Applied Digital’s contracted revenue and owes about $50 billion itself, and Reuters reported in mid-October that its 2031 bonds yielded more than 16%. CoreWeave reports on Nov. 10, and its borrowing costs matter as much as its growth.
Wednesday’s slide came on fears that Democrats’ midterm wins mean tighter rules on data centers, even though most data center permits come from state and local officials, not Congress.
A slow buy
Musk’s warning and the election look like noise here. Shareholders’ returns depend on what Applied Digital pays to borrow for the next 800 MW, and at less than half its usual multiple, the stock already prices in a bad answer. That argues for buying in stages, not all at once.
Until rent catches up with the interest bill, expect the stock to swing on every financing headline. The ones to watch are the fiscal second-quarter report expected in January and the debt for Polaris Forge 3 and the two Delta Forge campuses.
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