Applied Digital (APLD) Shares Are On Fire Tuesday: Here's Why - Applied Digital (NASDAQ:APLD)

Applied Digital Corp APLD shares are up Tuesday after APLD's AI Cloud Service, through its wholly-owned subsidiary Sai Computing, bagged its first major AI customer with a deal of up to $180 million over 24 months.
The customer will make a significant pre-payment under the agreement. The service will likely start coming online this June and fully ramp up by the end of the year.
Needham analyst John Todaro maintains APLD with a Buy and raises the price target from $3.7 to $5.5.
The analyst is excited about APLD's AI and Web3 expansions.
He estimates a $175 million - $220 million annual revenue opportunity for a 100MW HPC site.
Yesterday APLD announced the expansion of its HPC "starter" site to 9MW from 5MW and the launch of its AI cloud offering, Sai Computing.
The company expects ~90% of CY23 revenue from BTC mining hosting, but APLD is shifting its focus for future sites to almost exclusively HPC.
He believes there's a healthy demand backdrop given rising competing AI-based applications.
The price target boost also reflects an improved mining backdrop for its tenants.
As HPC customers onboard, the analyst expects further multiple expansions on revenue diversification, revenue stability (7-10 year contracts vs. 5-year), and more levers to pull to increase EBITDA margin over time.
Price Action: APLD shares traded higher by 56.70% at $5.35 on the last check Tuesday.

Applied Digital Shares Are On Fire Tuesday: Here's Why