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Applied Digital (APLD): Assessing Valuation After $11 Billion AI Data Center Expansion with CoreWeave

Simply Wall St · 09/23/2025 15:39
Applied Digital (APLD) has rocketed back into the spotlight after announcing an expanded data center lease agreement with CoreWeave, boosting its total contracted capacity to 400 megawatts and locking in about $11 billion in future lease revenue. This move is a big step forward for the company, marking its ongoing shift into powering the infrastructure behind high-performance AI computing. Given how much buzz there is around the AI market right now, it is no surprise that investors are rethinking what Applied Digital could be worth. Zooming out, the stock has put on a show in the past year, up a substantial 245% overall, with strong gains also coming in the past month and quarter. Momentum took another leap after news broke of these major contracts, aligning with a broader wave of optimism across AI infrastructure stocks. At the same time, these kinds of big commitments can also bring new risks and higher expectations. So, with the stock riding such powerful momentum, is this a genuine buying opportunity for investors, or is the market already factoring in all the growth that might come?

Most Popular Narrative: 22% Overvalued

The most widely followed narrative currently sees Applied Digital as trading at a significant premium, based on aggressive assumptions around future earnings, margins, and revenue growth.

The accelerating industry need for high-density, geographically distributed data centers to support AI and machine learning workloads places Applied Digital in a favorable position. The company is capitalizing on digital transformation trends that are set to drive ongoing utilization growth, improved asset values, and ultimately earnings expansion over the next several years.

Want to know the bold numbers behind this sky-high valuation? Analysts are betting on rapid growth, margin expansion, and a future profit multiple that rivals the biggest tech names. Which assumptions fuel this premium, and do they hold up under scrutiny? Keep reading to uncover the assumptions driving this headline valuation.

Result: Fair Value of $20 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent reliance on a few major customers and any sudden volatility in the cryptocurrency market could quickly challenge this optimistic growth outlook.

Find out about the key risks to this Applied Digital narrative.

Another View: What Does Our DCF Model Say?

Looking through the lens of our SWS DCF model, the picture looks similar. The result also points to the shares being overvalued. This raises a crucial question, though: Is the optimism built into both methods justified, or are investors overlooking key risks?

Look into how the SWS DCF model arrives at its fair value.
APLD Discounted Cash Flow as at Sep 2025
APLD Discounted Cash Flow as at Sep 2025
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Applied Digital for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Applied Digital Narrative

If you want to dig into the numbers yourself or have your own angle in mind, you can easily build a custom view of the story in just a few minutes. Do it your way.

A great starting point for your Applied Digital research is our analysis highlighting 1 key reward and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.