Applied Digital Could See Valuation Double as AI Infrastructure Boom Accelerates

The artificial intelligence sector faces headwinds lately, with investors questioning bubble valuations and the genuine returns from massive infrastructure spending. Yet a deeper look at corporate adoption reveals compelling fundamentals: EY’s survey of 500 U.S. business leaders showed 96% of companies deploying AI achieved productivity gains, with over half experiencing significant improvements. These organizations are doubling down—nearly 90% reinvesting AI efficiency gains back into new capabilities and infrastructure expansion.

This funding dynamic matters enormously for infrastructure plays. Applied Digital (NASDAQ: APLD) sits at the center of this AI buildout, operating dedicated data centers purpose-built for intensive computational workloads.

The Revenue Pipeline That Could Transform Valuations

Applied Digital’s business model hinges on long-term lease contracts with AI-hungry customers. The company is constructing 400 MW of capacity at its Polaris Forge 1 complex in North Dakota, already fully committed through signed contracts worth $11 billion over 15 years. Additionally, Applied Digital recently locked in a 15-year deal for 200 MW at Polaris Forge 2, valued at $5 billion.

The timing matters critically. Applied Digital deployed 100 MW at Polaris Forge 1 for customer CoreWeave and plans another 150 MW online next year, with the remaining capacity and Polaris Forge 2’s 150 MW coming in 2026. Once the company begins recognizing this lease revenue at scale—roughly $150 million expected in the latter half of fiscal 2026—the top line accelerates dramatically.

Current analyst consensus projects revenue reaching $297 million this fiscal year (ending May 2026), then surging 86% to $553 million in fiscal 2027. For context: Applied Digital posted 84% year-over-year growth to $64 million in Q1 fiscal 2026, demonstrating the applied intelligence of its customer acquisition strategy and infrastructure-first positioning.

Where The Math Gets Interesting For 2026

Current trading levels put Applied Digital at 36x sales—expensive on traditional metrics, but potentially justified. If the company hits $426 million in trailing-12-month revenue within a year (achievable given the pipeline visibility), and maintains even a modestly reduced 30x sales multiple, the market capitalization could reach $12.8 billion. That represents a doubling from current levels.

Wall Street’s 12-month median price target of $40 implies 76% upside, but the real opportunity lies in whether Applied Digital can sustain its premium valuation multiple as growth accelerates in 2026. The answer appears affirmative: with fully contracted capacity and predictable long-term lease cash flows, the company offers rare visibility in a volatile AI sector.

The 200% gains delivered in 2025 may seem extraordinary, but they reflect the market repricing a company transitioning from development stage to significant revenue recognition. As customers deploy capital and AI workload demands intensify, Applied Digital’s execution next year will likely reward the conviction.