2. Applied Digital Corporation (NASDAQ:APLD)
Average Analyst Share Price Target Upside: 130%
Average Analyst Share Price Target: $9.14
Number of Hedge Fund Investors in Q1 2024: 13
Applied Digital Corporation (NASDAQ:APLD) develops and operates data centers in North America. It operates primarily through two business divisions. One of these caters to cloud computing and the other builds facilities for high performance computing. These allow Applied Digital Corporation (NASDAQ:APLD) to capture all ends of the data center market, and the firm has recently been trimming its operations to shift its business model from being a blockchain company to a data center operator. Applied Digital Corporation (NASDAQ:APLD) also benefits from geography because of its facilities in regions such as North Dakota. These are cooler areas, that could allow it to grow operations in case data center operators turn to nature to manage some of their facilities’ heat generation. Applied Digital Corporation (NASDAQ:APLD) appears confident to operate as much as 900 megawatts of facilities in North Dakota alone.
Applied Digital Corporation (NASDAQ:APLD)’s management commented on this facility during its Q3 2024 earnings call where it shared:
“Furthermore, we made the strategic decision to sell Garden City as it was not compatible with our HPC growth strategy. This divestment enables us to redirect financial and operational resources towards our strategic sites in North Dakota, bolstering our growth initiatives in HPC and cloud service applications.
The decision to sell this facility underscores our commitment to optimizing our asset portfolio while focusing on our core growth areas. As a result of this sale, we will maintain 280 megawatts of data center hosting capacity across our two fully contracted locations in North Dakota. This positions us to be insulated from volatility in the crypto markets leading up to the halving event. Let’s move on to our cloud services business, which provides high performance computing power for AI applications. Despite a lack of significant sequential revenue growth due to delays in clusters entering revenue generation, this segment continues to experience rapid growth, as we advance in fulfilling our existing contracts and exploring new opportunities in our pipeline.
We’ve recently seen positive developments including the enrollment of clients like Together AI and we have exited this quarter with positive momentum. The newly-deployed clusters were turned over to customers late in the quarter, which will provide a significant positive inflection to revenue and EBITDA in our fiscal fourth quarter. Lastly, let me provide an update on our purpose-built HPC data centers. We currently have 400 megawatt of capacity in development across North Dakota, not including the 9 megawatt of capacity we have at our HPC facility in Jamestown to support cloud service customers. During the quarter, we continued to make significant strides in the construction of our 100 megawatt high performance computing facility in Ellendale, North Dakota.”
