Nvidia’s “Hidden Portfolio” Pick Crushes Earnings: Buy Now or Wait?

Applied Digital (NASDAQ:APLD) just beat the pants off of Wall Street. The high-performance computing and artificial intelligence (AI) data center operator released its fiscal first-quarter 2026 earnings after markets closed yesterday, and reported revenue of $64.2 million, up 84% year-over-year, handily beating analyst estimates of around $50 million. Adjusted net losses of $7.6 million, or $0.03 per share, trounced expectations for a $0.13 per share loss.

Key reasons for the stellar performance came in the form of $26.3 million from AI-driven tenant fit-outs for high-performance computing clients like CoreWeave (NASDAQ:CRWV), plus gains in data center hosting amid strong crypto demand. 

Adjusted EBITDA turned positive at $0.5 million, leading shares to surge over 22% in morning trading today, reflecting investor enthusiasm for Applied’s AI leasing momentum. But with the stock racing ahead, have investors missed the boat?

Inside Applied Digital’s Core Operations

Applied Digital designs, builds, and operates data centers optimized for demanding applications in AI, machine learning, blockchain, and high-performance computing (HPC). The company splits into two main segments: data center hosting, which provides colocation services for crypto mining and other workloads, and HPC Hosting, focused on purpose-built facilities for AI factories. 

Facilities like Jamestown and Ellendale in North Dakota run at full capacity — 286 megawatts (MW) total — leveraging low-cost power and efficient designs to serve clients needing massive compute power.

This setup positions APLD as a key enabler in the AI ecosystem, where hyperscalers and startups require scalable infrastructure for training large models. Unlike traditional data centers, APLD’s sites feature liquid-cooled systems with a power usage effectiveness (PUE) as low as 1.18, cutting energy costs and water use. The company also offers GPU cloud services through Sai Computing, deploying over 1,000 GPUs across third-party sites for AI tasks.

The Spark for Outperformance

Q1’s performance marked a clear pivot toward AI dominance. Revenue surged on $26.3 million from fit-out services at the Polaris Forge 1 campus, where APLD completed work for CoreWeave’s 400 MW lease — securing about $11 billion in long-term contracted revenue over 15 years. 

This deal, expanded from initial agreements in May, underscores hyperscaler trust in APLD’s AI-ready infrastructure. Data center hosting added $37.9 million, up 9% year-over-year, fueled by full utilization at key sites and Bitcoin (CRYPTO:BTC) prices hitting all-time highs, boosting crypto mining demand.

Costs, though, rose with growth — SG&A hit $29.2 million on higher stock compensation and personnel — but the beat highlighted Applied’s operational leverage. After the quarter ended, APLD drew $112.5 million from a $5 billion Macquarie Equipment Capital facility and raised $200 million in preferred stock, bolstering its $114 million cash position against $687 million in debt. 

Notably, APLD is one of the primary AI stocks held in Nvidiais (NASDAQ:NVDA) “hidden” portfolio, with the chipmaker owning about 7.72 million shares valued today at $254 million after the stock surge, signaling validation of its ecosystem.

Scaling AI Infrastructure Higher

Looking ahead, APLD eyes rapid expansion. Polaris Forge 1’s first 100 MW building nears readiness in Q4, with lease revenues ramping as tenants install gear. The next 150 MW phase targets mid-2026, and a third in 2027, potentially scaling the 400 MW campus beyond 1 gigawatt (GW) by 2030. Ground has broken on Polaris Forge 2, a 300 MW site (expandable to 1 GW) starting with 200 MW in 2026, backed by $50 million from Macquarie.

Advanced talks with an investment-grade hyperscaler could lock in a 1 GW lease, pushing total leased capacity to 600 MW across sites. Management projects a $500 million annualized net operating income run rate once Polaris Forge 1 stabilizes, with a $1 billion target in five years. 

APLD aims to evolve into an AI-focused data center real estate investment trust (REIT), tapping $400 billion in annual hyperscaler AI capex. While there are risks, Applied’s multi-GW pipeline and long-term contracts offer visibility.

Analysts praised APLD’s results, emphasizing its AI leasing as a growth engine. Citizens JMP raised its target price to $35 per share from $18, citing “transformative” CoreWeave deals and Macquarie funding as de-risking factors for 2 GW+ development. Roth Capital hiked to $43 from $24 per share in late September, highlighting APLD’s edge in low-PUE designs saving clients billions over time.

Overall, views focus on APLD’s shift from crypto volatility to stable AI revenue, though some caution on execution amid high debt.

Key Takeaways

Applied Digital’s earnings validate its AI bet, with leasing deals and funding unlocking multi-year growth in a $350 billion market. The 22% pop reflects real progress, but at post-surge prices, APLD’s valuation is stretched, trading above some targets despite its forward potential. 

For risk-tolerant investors, however, APLD is still a buy. Nvidia’s stake and hyperscaler talks signal upside to $30 to $40 per share if it hits its milestones. Yet, irrational exuberance risks a swift pullback. Waiting for dips near $25 could offer a better entry point given construction risks and its debt load. 

Savvy investors will balance APLD’s growth hype with patience as its trajectory favors longs, but timing matters.