Applied Digital signs $5 billion AI factory lease with U.S. based hyperscaler

Applied Digital announced on Wednesday that it has entered into a monumental $5 billion lease agreement with a U.S.-based hyperscaler, marking a significant step in its growth strategy. Following the announcement, shares of the data center company saw a decline of over 7%, extending a downward trend that has seen the stock plummet by more than 20% within the past week. Despite this recent setback, the stock has nearly quadrupled in value this year. The lease, which spans approximately 15 years, will provide an impressive 200 megawatts of capacity at the Polaris Forge 2 campus located in North Dakota. This new agreement brings Applied Digital's total leased capacity to 600 megawatts across its two Polaris Forge campuses. In a landscape where major cloud providers and tech giants are intensifying their investments in artificial intelligence infrastructure, this move aligns with the industry's expectation for a surge in demand for data centers. While Applied Digital did not disclose the identity of its partner for this latest lease, it did mention that the partner is an "investment grade hyperscaler." In a conversation with CNBC's "Squawk on the Street," CEO Wes Cummins highlighted the five main U.S. hyperscalers—Microsoft, Meta, Oracle, Amazon, and Google—as the primary targets for their partnerships. He noted that CoreWeave was the tenant for their earlier lease arrangement. Cummins reflected on the company's journey, stating, "We started down this path a couple of years ago and we stubbed our toe a few times, but I think we've really dialed in the process of the ability to build at scale." He also mentioned that Applied Digital has a robust 4 gigawatt active pipeline. Earlier this June, the company secured two long-term lease agreements with CoreWeave, totaling 250 megawatts of capacity, which previously boosted their shares by 48% when it was announced. Additionally, earlier this month, Applied Digital received $5 billion in infrastructure funding from Macquarie Asset Management. Cummins emphasized the significance of Polaris Forge 2, stating, "This builds on that momentum, reflecting the strength of our partnerships and the speed at which we're reshaping the AI infrastructure landscape."