Few relationships in the data center sector carry stakes as concentrated as Applied Digital’s (NASDAQ: APLD) bet on a single tenant whose debt markets are flashing red.
The entire 400 megawatt capacity of Applied Digital’s Polaris Forge 1 campus in North Dakota is leased exclusively to CoreWeave (NASDAQ: CRWV), a commitment that anchors both companies’ financial futures.
That 15-year, take-or-pay arrangement carries a base-term value of approximately $11.0 billion, representing 30.4% of Applied Digital’s $36.2 billion in total contracted revenue as of May 31.
For context, only a single tier-one hyperscaler, accounting for 55.8% of contracted revenue, represents a larger share of Applied Digital’s income base.
CoreWeave actually pays a premium rate for the arrangement, at roughly $1.83 million per megawatt annually, around 10% above the $1.65 million to $1.67 million that investment-grade hyperscalers pay across other Applied Digital contracts.
Yet despite those contractual protections, Applied Digital’s stock sank to a 52-week low last week, dragged down by mounting anxiety over its tenant’s financial position.
CoreWeave’s unsecured debt is now yielding approximately 16%, a level that MoffettNathanson managing director Nick Del Deo called deeply anomalous on CNBC’s Closing Bell Overtime, saying “it’s pretty uncommon to see a company with debt yielding at that level in the market, but also have a 30 billion or so market cap. One of those two things is wrong.”
CoreWeave’s total debt more than tripled over the past year, reaching $51.6 billion as of June 30, while Del Deo noted the company is largely shut out of unsecured bond markets precisely when it requires tens of billions in additional funding.
A backstop many investors assumed was reliable has also grown less certain, after reports emerged that Nvidia (NASDAQ: NVDA) is now investigating CEO Jensen Huang over an alleged relationship with a Chinese spy, weeks after Huang had publicly defended CoreWeave.
D.A. Davidson head of technology research Gil Luria addressed the implications on Squawk on the Street, warning that “if somebody owns CoreWeave with the belief that, oh, Nvidia is just a backstop, that becomes more challenging without Jensen Huang.”
On the lease protection side, Applied Digital’s structure offers meaningful insulation: a departing tenant owes the full remaining contract value, and in March 2026 CoreWeave shifted portions of two Polaris Forge 1 leases into an A3-rated subsidiary carrying a parent guarantee.
The remaining 69.6% of Applied Digital’s contracted rent, totaling $25.2 billion, flows from investment-grade hyperscalers, providing a substantial buffer against any single-tenant shock.
Applied Digital’s geographic positioning also sidesteps regulatory turbulence, with its signed campuses located in North Dakota, Louisiana, and Alabama, away from the data center construction pause that Texas Governor-elect Gina Hinojosa has called for.
The more pressing concern for Applied Digital may be its own balance sheet rather than CoreWeave’s, given that interest expense surged to $78.9 million in the quarter ending August 31, up sharply from just $9.6 million in the same period a year earlier.
That financing burden, including capitalized construction interest and preferred dividends paid in kind to Macquarie, amounted to 2.6 times the $65.8 million in base rent Applied Digital actually collected that quarter.
CEO Wes Cummins disclosed on November 2 that the company still needs to secure funding for approximately 800 megawatts over the coming twelve months, even as share dilution continues, with shares outstanding climbing from 287.88 million on May 31 to 302.39 million by October 6.
Analysts project Applied Digital’s revenue will more than triple between fiscal 2026 and fiscal 2028, a forecast that holds only if the rent schedule behind it remains intact.
Applied Digital’s next earnings report, due in January, will cover the first complete quarter with 250 megawatts operational at Polaris Forge 1, providing the clearest read yet on whether the company’s capital structure can support its ambitions.
