Applied Digital Lands $7 Billion CoreWeave Deal, Reshaping AI Infrastructure Landscape
Dallas-based company transforms from crypto mining operator to major AI data center provider with landmark 15-year agreement
Applied Digital Corporation's announcement of a massive $7 billion lease agreement with CoreWeave represents a seismic shift in the artificial intelligence infrastructure market, catapulting the Dallas-based company from the margins of cryptocurrency mining into the center of America's AI boom.
The 15-year deal, structured across two separate lease agreements for Applied Digital's ambitious Ellendale, North Dakota campus, will deliver 250 megawatts of critical computing capacity to CoreWeave, with options for an additional 150MW that could push total contracted power to 400MW. At approximately $467 million in annual revenue, the agreement dwarfs Applied Digital's entire fiscal 2024 revenue by more than eight times.
Table: Summary of Applied Digital's Business Model using the Business Model Canvas framework. This table organizes key components of Applied Digital’s operations, partnerships, and value creation strategies.
| Business Model Canvas Element | Details |
|---|---|
| Key Partners | - NVIDIA (GPU & networking solutions) - Technology providers - Energy providers (renewables) - Gateway Group, Inc. (investor relations) |
| Key Activities | - Data center design & construction - Infrastructure management - GPU-as-a-Service cloud offerings - HPC hosting |
| Key Resources | - Advanced data centers - NVIDIA GPU infrastructure - Strategic renewable-energy locations - Security systems - Technical expertise in AI/HPC |
| Value Propositions | - Energy-efficient & sustainable infrastructure - Scalable, cost-effective solutions - Turnkey managed services - AI-ready, next-gen infrastructure |
| Customer Relationships | - Managed services model - Enterprise partnerships - Flexible pricing (pay-as-you-go) |
| Channels | - Direct sales - Applied Digital Cloud platform - Strategic partner network |
| Customer Segments | - AI/ML companies - Crypto mining firms - Enterprise digital transformation clients - HPC users - Sustainability-minded businesses |
| Cost Structure | - Infrastructure development & equipment - Energy (renewable-focused) - Operations & maintenance - Depreciation - Personnel |
| Revenue Streams | - Data center hosting ($43.7M in Q4 2024) - Cloud Services (33% of annual revenue) - HPC Hosting - IaaS & PaaS solutions |
Note: Applied Digital is transitioning toward becoming a REIT by divesting its cloud services arm, which will significantly alter this business model going forward.
From Mining Rigs to AI Powerhouse
The transformation reflects broader market dynamics as former cryptocurrency infrastructure companies pivot to capture exponential demand for AI computing capacity. Applied Digital's Ellendale campus, initially conceived as a traditional data center development, has evolved into what industry experts describe as one of North America's most ambitious AI-focused facilities.
"The economics are fundamentally different from traditional data center leasing," explained one infrastructure analyst familiar with AI hosting agreements. "Where conventional colocation might generate $300,000 to $500,000 per megawatt annually, AI-optimized facilities are commanding $1.8 to $2 million per megawatt."
The revenue density reflects the specialized requirements of AI workloads, which demand high-performance computing infrastructure, advanced cooling systems, and reliable power delivery capable of supporting GPU-intensive operations that consume dramatically more electricity than traditional server deployments.
CoreWeave's Strategic Infrastructure Push
CoreWeave's selection of Applied Digital represents a significant validation of the company's technical capabilities and execution potential. The AI infrastructure provider has emerged as one of the most aggressive capacity acquirers in the market, recently securing 260MW from Galaxy Digital's Texas operations and accumulating over 1.3 gigawatts of committed capacity across multiple providers.
The partnership structure includes more than just lease payments. CoreWeave received warrants to acquire up to 13.06 million Applied Digital shares at $7.19 per share, creating alignment beyond the contractual relationship and providing the AI company with potential equity upside if Applied Digital's transformation succeeds.
This equity component signals CoreWeave's confidence in Applied Digital's long-term prospects while providing the warrant holder with participation in value creation beyond the lease economics.
Engineering for Extreme Computing Demands
The Ellendale campus represents a purpose-built approach to AI infrastructure challenges. Unlike retrofitted facilities, the North Dakota development incorporates direct-to-chip liquid cooling systems combined with traditional air cooling, targeting an impressive 1.15 power usage effectiveness rating.
The facility's high-density design accommodates peak rack loads significantly higher than conventional data centers, with power distribution engineered to support the intensive requirements of modern AI accelerators. Applied Digital expects the first 100MW building to achieve commercial operation in the fourth quarter of 2025, followed by the 150MW second building in mid-2026.
North Dakota's climate provides natural cooling advantages, reducing operational expenses while the region's abundant wind power resources offer access to low-cost, renewable electricity—critical factors given AI workloads' substantial energy consumption.
Financial Architecture and Risk Profile
The deal's structure creates extraordinary revenue visibility while introducing concentrated customer exposure. Applied Digital anticipates generating the full $7 billion over the approximately 15-year initial term, with three additional five-year renewal options that could extend the economic relationship beyond two decades.
However, the agreement creates substantial dependence on CoreWeave's financial stability and growth trajectory. The AI company retains termination rights with specified fees, and Applied Digital faces potential penalties if delivery milestones are missed.
Applied Digital has partially addressed capital requirements through its joint venture with Macquarie Asset Management, which committed up to $5 billion in development funding with an initial $900 million earmarked for Ellendale construction. This partnership structure reduces Applied Digital's direct capital exposure while maintaining operational control.
Market Implications and Competitive Dynamics
The agreement occurs amid unprecedented demand for AI computing infrastructure, driven by the rapid advancement of large language models and generative AI applications. Traditional cloud providers and specialized AI infrastructure companies are competing intensively for available capacity, creating favorable conditions for facility operators who can deliver appropriate technical specifications.
Applied Digital's success in securing this agreement positions the company among a select group of public AI infrastructure providers, alongside Galaxy Digital and a handful of private operators. The pricing achieved—approximately $1.87 million per megawatt annually—aligns with recent industry transactions and validates the premium economics available to providers capable of addressing AI workloads' specialized requirements.
The Ellendale campus's eventual 1-gigawatt potential capacity, currently under various stages of utility load studies, could accommodate significant additional expansion if AI demand continues accelerating.
Investment Considerations and Market Positioning
Applied Digital's stock, currently trading at $6.83 following a modest decline on the announcement day, reflects investor uncertainty about execution risk and customer concentration concerns. The company's transformation from cryptocurrency mining operations to AI infrastructure provider represents both opportunity and challenge.
Market analysts suggest the contracted revenue stream provides unprecedented cash flow visibility for Applied Digital, fundamentally altering the company's risk profile from developmental to operational. However, successful execution of the aggressive construction timeline and technical specifications remains critical to realizing projected returns.
The warrant issuance to CoreWeave, while creating potential dilution of approximately 5.8% of outstanding shares, also demonstrates the AI company's confidence in Applied Digital's prospects and creates aligned incentives for mutual success.
Infrastructure for the AI Era
Applied Digital's CoreWeave agreement represents more than a single transaction—it exemplifies the massive infrastructure investment required to support America's AI ambitions. As artificial intelligence applications continue expanding across industries, the demand for specialized computing facilities capable of supporting high-performance workloads is expected to grow exponentially.
The success of the Ellendale development could establish Applied Digital as a preferred infrastructure partner for AI companies seeking reliable, large-scale capacity outside traditional cloud provider ecosystems. With CoreWeave's option for additional 150MW capacity and Applied Digital's broader campus expansion potential, the partnership could evolve significantly beyond its initial scope.
For investors, the deal represents a fundamental transformation of Applied Digital's business model from speculative cryptocurrency infrastructure to contracted AI services provider. While execution risks remain substantial, the revenue visibility and market positioning suggest Applied Digital has successfully navigated the transition from crypto winter to AI spring.
The financial projections and analysis contained in this article are based on publicly available information and should not be considered investment advice. Past performance does not guarantee future results, and readers should consult with qualified financial advisors before making investment decisions.