THE LITTLE ENGINE THAT COULD (IF EVERYTHING GOES PERFECTLY

(APLD), (CRWV), (DOCN), (EQIX), (DLR)

My neighbor Steve called me Tuesday morning, practically hyperventilating through the phone. “John,” he says, “you gotta check out this Applied Digital thing. Some company nobody’s heard of just signed a seven billion dollar deal!”

Seven billion. For a company that generated $53 million last quarter.

Now, when someone gets that excited about a stock that’s jumped 50% overnight, my first instinct isn’t to celebrate. It’s to start asking uncomfortable questions. 

And boy, do I have questions about Applied Digital (APLD).

What happened was this: Applied Digital, a Dallas-based data center company that most people couldn’t pick out of a lineup last week, just inked a 15-year lease agreement with CoreWeave (CRWV) for $7 billion. 

To put that in perspective, that’s more than their entire market cap before the news broke. 

CoreWeave is the AI darling that’s become the Airbnb of GPU compute power, renting specialized hardware to companies needing massive processing power for AI training.

The deal gives CoreWeave access to 250 megawatts of power at Applied Digital’s North Dakota facility, enough juice to power about 300,000 homes.

Let’s do the math: $7 billion over 15 years works out to about $467 million annually. 

For a company that just reported $53 million in quarterly revenue, that’s like a corner hot dog stand suddenly signing an exclusive catering contract with the Pentagon. 

Which brings me to my first uncomfortable question: what exactly are investors paying for here?

Applied Digital’s forward price-to-sales ratio is sitting at 10.17x, nearly four times the sector median. Their EV-to-sales multiple? An eye-watering 14.49x. 

Those aren’t growth stock valuations — those are “betting the farm on the future” valuations. 

The bulls argue Applied Digital is being compared to the wrong peer group, that companies like DigitalOcean (DOCN) aren’t real competitors because they’re not focused on AI infrastructure. Fair enough. 

But even comparing them to actual data center players like Equinix (EQIX) and Digital Realty (DLR), you’re still paying a premium that assumes everything goes perfectly for the next decade and a half.

That assumption becomes even more problematic when you consider what Applied Digital is really betting on. 

This isn’t just a wager on AI growth. It’s a bet on sustained, exponential AI growth for 15 years. That’s forever in technology time. Remember when everyone thought we’d all be living in virtual reality by now? 

Technology trends have a funny way of evolving in directions nobody expects, and this entire deal hinges on one customer that’s currently riding high but operating in a space that’s also quickly evolving.

CoreWeave could get acquired, face competitive pressure, or simply decide they need different infrastructure as AI technology evolves. 

That customer concentration risk becomes even more concerning when you look at Applied Digital’s recent performance. 

Their revenue growth was solid until last quarter, when revenue dropped from $64 million to $53 million. 

Management blamed client delays and rising power costs. Both are legitimate concerns that show how quickly things can change in this industry.

Still, there’s certainly no denying we’re witnessing something historic in AI infrastructure demand. 

Companies are throwing money at compute power like it’s 1999 and everyone’s trying to get online. The difference is, this time the technology actually works and is generating real value. 

Everyone wants to own the “picks and shovels” of the AI revolution because, historically, equipment sellers made more consistent money than the miners themselves. 

But modern picks and shovels aren’t simple tools. They’re some of the most complex, expensive infrastructure humanity has ever created.

Applied Digital operates through three segments: data center hosting, cloud services, and high-performance computing. 

Data centers contributed 66% of revenue last quarter, meaning this CoreWeave deal essentially doubles down on their biggest bet. That’s either smart focus or dangerous concentration, depending on your perspective. 

The facility expansion timeline adds another layer of execution risk, with Applied Digital expecting the first 100MW to be serviceable by Q4 2025 and additional capacity coming online in 2026. 

Construction delays, power grid issues, or changes in AI compute requirements could trigger a correction that makes your portfolio feel like it underwent emergency surgery.

Applied Digital just scored the deal of a lifetime and deserves credit for landing a whale when they were fishing for minnows. 

The CoreWeave partnership validates their strategy and positions them as a legitimate player in AI infrastructure. 

Nevertheless, even the best business deals can make terrible stock purchases at the wrong price. 

At current valuations, you’re betting not just on AI growth, but on Applied Digital’s ability to execute flawlessly while their customer base evolves and infrastructure demands shift.

For those convinced that AI infrastructure is entering a sustained boom (and the evidence is compelling) consider dollar-cost averaging into positions on significant weakness. 

The recent run-up might have gotten ahead of the fundamentals, but the underlying story could still have legs. 

Just remember: in the AI gold rush, sometimes the real money is made by those patient enough to wait for the right price on the right shovel. Even when that shovel comes with a seven billion dollar contract attached.