Nvidia-backed data center builder Applied Digital to raise up to $5 billion; shares rise
Applied Digital has secured funding from Macquarie to complete the buildout of its Ellendale data center (pictured). / Photo: x.com/APLDdigital
Applied Digital, a builder of data centers, whose shares are held by AI chip market leader Nvidia, has reached an agreement for Australia-based Macquarie to invest up to $5 billion in Applied Digital’s AI data center projects. Following the news, Applied Digital stock surged almost 10% before giving back around 6% in premarket trading the next day.
Details
On Tuesday, January 14, Applied Digital (AD) announced that funds managed by Macquarie Asset Management had agreed to invest up to $900 million in AD’s high-performance computing (HPC) data center campus, which is being built in Ellendale, North Dakota. Macquarie also has the right to invest up to an additional $4.1 billion in other AD data center projects, selected at its discretion, over the next 30 months.
In return, the Australian firm will receive AD preferred shares and a 15% common equity stake in an AD subsidiary, APLD HPC Holdings LLC, which focuses on building HPC data centers. Applied Digital will retain the remaining 85% stake in the subsidiary. The preferred shares will accrue a 12.75% annual dividend.
Applied Digital plans to use the proceeds to complete the buildout of its Ellendale data center, repay a bridge loan of about $180 million, and thus recover over $300 million of its equity investment, according to the press release.
"As the demand for AI innovation accelerates, we believe Applied Digital will stand out as a leader in delivering next-generation data center solutions and GPU cloud services," the company said.
Financial performance
On Tuesday evening, AD released its financial results for the fiscal-2025 second quarter (ended November 30). Revenue grew 51% year over year to $63.9 million, while its negative $138.7 million bottom line was 13 times the size of the net loss in the previous-year period. Still, the per-share adjusted loss of $0.06 was narrower than analysts’ estimates of $0.14 (more than double the actual figure), as noted by .
In November, AI chip and GPU manufacturer Nvidia disclosed its investments in AD. As of September 30, 2024, Nvidia owned 7.72 million AD shares worth about $63.7 million, equivalent to a roughly 3% stake.
Market reaction
On Tuesday, AD stock jumped 10% to $8.54 per share before dropping nearly 6% in premarket trading today, Wednesday, January 15. It is now up about 66% over the last 12 months.
The eight analysts who cover AD unanimously rate it a "buy." Their average target price of $11.50 per share suggests 35% upside versus the last closing price.
