A regulatory threat aimed at Texas data centers is landing hardest on competitors, giving Applied Digital (NASDAQ: APLD) an unexpected edge as its stock clawed back 7% in a single session.
Texas Governor-elect Gina Hinojosa has pledged to block new data center approvals statewide until authorities establish formal rules governing power and water consumption costs.
Applied Digital’s exposure to that freeze is minimal: its only Texas project is a planned 50 MW facility, while its larger leased campuses sit outside the state entirely.
The situation is considerably more complicated for IREN (NASDAQ: IREN), whose Microsoft-linked buildings are located in Childress, Texas, squarely within the regulatory crosshairs.
Galaxy Digital (NASDAQ: GLXY) faces its own complications, with 830 MW of approved but untenanted capacity sitting at its Helios campus in Dickens County, Texas, and no clarity on whether a new approvals freeze would affect that idle capacity.
The 7% gain for Applied Digital follows a brutal Thursday session that wiped 15% off the stock’s value, dragging it to a fresh 52-week low alongside Galaxy Digital in a broad midterm-driven selloff.
The catalyst for Friday’s recovery was an announcement from IREN, which disclosed after Thursday’s close that its annualized revenue target of more than $4 billion is “fully contracted and fully funded,” a declaration that lifted sentiment across the data center sector.
IREN’s AI Cloud revenue nearly tripled from the prior quarter to $200 million, though $6 billion of the $15 billion the company still plans to spend this fiscal year remains contingent on financing subject to market conditions.
For Applied Digital, the more pressing question is not a rival’s funding status but its own: CEO Wes Cummins stated on CNBC that the company requires financing for roughly 800 MW of capacity within the next 12 months.
Total debt had already reached $6.48 billion as of August 31, a figure that sits in sharp contrast to the company’s cash position and underscores the urgency of securing its next credit facility.
The company’s 1,410 MW of signed leases underpins analyst forecasts for revenue to more than triple between fiscal 2026 and fiscal 2028, a growth trajectory that hinges on successfully closing that funding gap.
Despite the ambitious growth outlook, the stock currently trades at just 4.7 times forward sales, well below its three-year average multiple of 11 times, suggesting the market is discounting execution risk heavily.
The pricing on Applied Digital’s next debt deal will serve as a critical signal: its June notes came in at 7.00%, whereas the notes issued last November carried a 9.25% coupon, with anything near the higher rate representing a meaningful transfer of economics to lenders.
With the Texas regulatory threat largely bypassing its core assets, the Friday rebound appears grounded in fundamentals, though the company’s ability to fund its expansion pipeline remains the defining variable for investors watching the stock.
