Artificial intelligence (AI) is already changing the world. However, it's also becoming evident that AI consumes computing power and resources to a degree unlike any previous technology, and traditional data centers aren't up to the task of supporting it.
Applied Digital (APLD +5.46%) is among a new crop of companies specializing in building high-tech data centers specifically engineered for AI's needs. The company expects explosive growth as it brings new data centers online over the next few years.
But could buying this growth stock today help make you a millionaire?
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Cashing in on the AI data center boom
Applied Digital started in the cryptocurrency space, building data centers dedicated to Bitcoin mining. But with hundreds of billions of dollars pouring into AI data centers over the past few years and demand for high-performance computing infrastructure outpacing supply, the company has shifted its focus. According to a study by McKinsey & Company, total data center expenditures could reach $7 trillion by 2030, with the lion's share of those outlays supporting AI.
Right now, Applied Digital is building two new AI data center campuses -- Polaris Forge 1 and Polaris Forge 2, which will have total capacities of 450 megawatts (MW) and 300 MW, respectively. The company expects to complete both projects in 2027. It has also begun construction on Delta Forge 1, another campus with an initial capacity of 430 MW, which could begin operations by mid-2027.
There is significant revenue growth ahead for the company as these data centers come online. Applied Digital has signed lease deals with CoreWeave totaling $11 billion in revenue over 15 years. It also signed a lease agreement valued at approximately $5 billion over 15 years with another AI company that it has yet to name.
NASDAQ: APLD
Key Data Points
Is Applied Digital a millionaire maker?
All of these exciting developments have already encouraged traders to bid up Applied Digital's share price significantly. The stock is up by 700% over the past 18 months, pushing the company's market cap to $9.5 billion.
Wall Street analysts estimate that Applied Digital will earn approximately $346 million in revenue in its fiscal 2026, which ends May 31, and $535 million in its fiscal 2027. As such, the stock trades at 17 to 18 times next year's revenue estimates.
That's a pretty expensive valuation for a company that's currently burning through cash to fund all of this data center construction, is relying on a few large deals, and would face trouble if AI investments fall off for any reason over the next decade.
Anyone who invested in Applied Digital 18 months ago and held on made a ton of money on the stock. Unfortunately, that train has left the station, and it seems unlikely that new buyers will enjoy similar results.
