Data Center Stocks Tumble as Financing Costs Draw Scrutiny: Cipher Digital Drops 9%, Applied Digital Falls 6%

Data center developers that borrow heavily to build ahead of their rent checks are under pressure as financing costs draw fresh scrutiny. Cipher Digital (NASDAQ:CIFR) stock is down 9% to $9.02, leading the decline. At the same time, Applied Digital (NASDAQ:APLD) stock is down 6% to $19.15, a deep slide for a company that builds capacity to lease.

The Global X Data Center & Digital Infrastructure ETF (NASDAQ:DTCR) is down 1.5% to $25.91, a far smaller drop than shares of either developer. Meanwhile, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is down 0.35% to $766.93, a minor dip by comparison.

That spread points to a repricing of financing risk at Cipher Digital and Applied Digital. The market still values demand for capacity. A smaller decline in the data center fund indicates this, even as it marks down companies that finance their buildouts ahead of the revenue.

Zero-Coupon Convertible Puts Financing in Focus

Yesterday, Cipher Digital priced a zero-coupon convertible note offering, setting the conversion price well above where its shares were trading. The offering directs proceeds toward a larger equity stake in Barber Lake, its high-performance computing (HPC) expansion, and toward more development sites.

On paper, those terms look friendly to Cipher Digital. A zero-coupon note pays no cash interest, and a high conversion price pushes potential dilution further out.

Cipher Digital develops industrial-scale data centers engineered for HPC workloads for hyperscale tenants. Its contracted campuses sit at Black Pearl, Barber Lake and Stingray, and it runs a mining operation at its Odessa, Texas site.

First Black Pearl capacity came online for Cipher Digital ahead of schedule. However, heavy project debt against a thin equity base and Texas grid interconnection timelines shape the bear case.

Builders Raising Money Against Future Rent

Applied Digital builds capacity to lease, so it raises money against contracts that pay out later. Its HPC Hosting segment operates AI Factory data centers leased to hyperscale customers under long-term contracts.

Core Scientific (NASDAQ:CORZ) is converting mining capacity toward HPC, the same path Cipher Digital is taking. Most of Core Scientific’s revenue now comes from high-density colocation for AI workloads.

Cipher Digital, Applied Digital and Core Scientific raise money against contracts that pay out later, linking their valuations to the price of capital. Capital costs are rising. That could squeeze returns on capacity that won’t earn rent until construction finishes, and the same squeeze is changing the broader group of suppliers supporting the AI data center expansion, which we profiled in a free report on seven non-chipmaker names behind the boom.

What the Fund Figures Say About the Selloff

Applied Digital sits among the holdings of the Global X fund, whose largest positions are established data center operators and tower owners. That mix is consistent with the fund falling far less than shares of either developer.

Measured against the SPDR S&P 500 ETF Trust, Cipher Digital stock and Applied Digital stock stand out even more. The broad market is only slightly lower by comparison.

Barber Lake Is the Next Test for Cipher

For Cipher Digital, the key question is whether the Barber Lake stake converts into contracted capacity. Signed capacity there could tie the new convertible notes to rent-paying assets, while delays could leave Cipher Digital shareholders facing potential dilution without matching revenue. Further occupancy by the Barber Lake tenant could strengthen that bull case.

For Applied Digital, the open variable is the cost of the debt it raises against future leases. Higher borrowing costs could erode returns on capacity it has already leased. Until financing costs settle, a more conservative approach is to moderate positions in leveraged builders like Cipher Digital and Applied Digital rather than adding aggressively on the dip, and watch the Global X DTCR fund for signs the repricing is spreading.

Contact [email protected] for any questions or corrections.