Applied Digital brings 75 MW of compute online at Polaris Forge facility as valuation debate builds.

Applied Digital has returned to investor focus after bringing an additional 75 MW of AI capacity online at its fully leased Polaris Forge 1 campus, amid broader volatility in AI infrastructure stocks.

The company's share price has experienced sharp near-term pullbacks, with losses across the 1-day, 7-day, and 30-day periods all in double digits. However, longer-term momentum remains intact, with a 90-day return of 10.51% and a 1-year total shareholder return of 233.08%. This combination of short-term weakness alongside substantial longer-term gains reflects investor uncertainty as the company scales new capacity, faces sector-wide sentiment shifts, and adjusts to recent index reclassifications that elevated it into larger-cap benchmarks.

Applied Digital currently trades at $30.71, significantly below consensus analyst targets. The company's most widely cited valuation narrative assigns a fair value of $73.36, implying the stock is deeply undervalued. This gap reflects aggressive assumptions about revenue scaling and future profit multiples embedded in analyst models.

The company recently secured long-term leasing agreements with CoreWeave, a major AI hyperscaler, for its purpose-built Polaris Forge 1 data center campus. The 15-year contracts represent $7 billion in total contracted revenue, providing a multi-year recurring revenue stream designed to support future cash flow stability and growth.

However, the valuation case faces headwinds. Applied Digital trades at a price-to-sales multiple of 27.5x, substantially above the 1.9x median for the US IT sector and even the 25x ratio that analysts consider fair value for the stock. This premium already embeds aggressive growth expectations.

The investment narrative also carries material risks. The company relies heavily on debt financing and maintains customer concentration, with revenue dependent on a small group of large hyperscalers and cryptocurrency firms. A shift in market conditions or customer demand could quickly undermine the undervaluation thesis.