Wells Fargo began coverage of Applied Digital Corporation (NASDAQ:APLD) on September 17 with an Overweight rating and a $50 price target. Analyst Eric Luebchow named it a Top Idea. The shares rose after the note and have stayed above their pre-call level since.
Wells Fargo’s call is built on leases already signed, not on demand it expects to arrive. Applied Digital builds and leases data centres to AI companies, and now has roughly 1.4 gigawatts under contract. The bank puts the base-term value of those leases at about $36 billion, and says renewals could take that beyond $86 billion across three decades. More than 70% of the contracted megawatts sit directly with Meta and Oracle.
The Contracted Book Alone is Worth More Than the Share Price:
Wells Fargo’s central claim is a valuation one. Luebchow values the existing contracted leases at roughly $30 a share on a net present value basis. The stock closed at $24.39 the day before the call. On the analyst’s own maths, the signed leases exceed the pre-call share price, which values the unbuilt pipeline at close to nothing. The gap between that $30 and the $50 target looks like the capacity not yet under contract.
The leases themselves are the reason. These are take-or-pay agreements, which means tenants pay whether or not they use the capacity. Wells Fargo describes the backlog as investment-grade concentrated, so the counterparties are large and creditworthy. A start-up tenant can go bankrupt and stop paying. An investment-grade tenant is far less likely to.
Power is the other advantage. AI data centres need utility allocations and grid connections, and those take years to secure. Wells Fargo argues that grid access, not capital, is the scarce input, and that Applied Digital secured its allocations early. The bank describes the company’s footprint as power-advantaged, carrying less regulatory risk than rivals building in contested markets.
Contracted is Not Built, and the Tenants Are Few:
None of the backlog pays until it is built, and the building is funded with other people’s money. Applied Digital has a facility of up to $5 billion in preferred equity from Macquarie Asset Management, drawn in tranches. Preferred equity sits ahead of common shareholders in the capital stack. A take-or-pay lease also fixes the revenue while leaving cost overruns with the developer. A delayed campus still owes money on its financing while earning nothing.
Tenant concentration is the second issue. A backlog resting on Meta, Oracle and CoreWeave is only as strong as those three. The CoreWeave lease is the weakest link, though Wells Fargo notes it carries Meta credit support inside a highly rated vehicle. CoreWeave is funding its own expansion with debt and has commitments to several landlords at once, so a tenant that over-commits renegotiates with all of them together.
The headline number is a thirty-year renewal scenario, not a contract. The $36 billion base term is the contracted figure, and even that arrives only if every campus is finished and handed over. The $30 a share rests on discounting cash flows that begin years from now, and the published coverage of the note does not give the discount rate behind it.
Conclusion:
Wells Fargo has put a number on what Applied Digital’s signed leases are worth, and on its maths the contracted book covers most of the current share price. However, three concerns remain. They are the capital needed to build 1.4 gigawatts, the concentration in three tenants, and the gap between contracted and delivered. The next test is the fiscal first-quarter report in mid-October. Watch the gap between megawatts contracted and megawatts actually earning revenue, because new lease announcements are the easiest thing to produce on a bad quarter.
Market Sentiment:
Applied Digital Corporation was held by 59 hedge funds with a combined stake value of about $2.7 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 39 hedge fund holders with a cumulative investment value of around $1.3 billion in the previous quarter.
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This article is originally published at Insider Monkey.
