Needham Backs Applied Digital as Revised CoreWeave Lease Expected to Cut Capital Costs

Stock News04-16 15:45

Applied Digital (APLD.US) recently renegotiated its lease agreement with CoreWeave (CRWV.US) for a data center in North Dakota. Investment firm Needham stated that this move is expected to lower Applied Digital's capital costs. Needham analysts wrote in a report, "The ultimate impact of this adjustment is that Applied Digital's lenders are now guaranteed by an investment-grade (IG) credit entity, rather than CoreWeave's parent company, which holds a BB rating. This implies that Applied Digital's project-level debt costs will decrease over time." The analysts also noted that a similar situation could occur with Core Scientific (CORZ.US). They believe that credit rating reports indicate Core Scientific's data center site in Dalton will support Meta's workloads through CoreWeave. If the computing resources Core Scientific leases from CoreWeave are ultimately used by investment-grade (IG) credit entities like Meta or Anthropic, then Core Scientific would not solely bear CoreWeave's credit risk. This could create opportunities for more favorable financing terms. It is worth noting that Applied Digital's stock fell after reporting third-quarter results on Thursday, but Needham maintained its "Buy" rating on the stock with a $41 price target. The firm pointed out that Applied Digital's third-quarter performance exceeded expectations, and the company's execution progress is in line with forecasts. It is currently awaiting lease finalization with a hyperscale customer. Needham rates CoreWeave as "Hold" and Core Scientific as "Buy."

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It is worth noting that Applied Digital's stock fell after reporting third-quarter results on Thursday, but Needham maintained its \"Buy\" rating on the stock with a $41 price target. The firm pointed out that Applied Digital's third-quarter performance exceeded expectations, and the company's execution progress is in line with forecasts. It is currently awaiting lease finalization with a hyperscale customer. 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It is worth noting that Applied Digital's stock fell after reporting third-quarter results on Thursday, but Needham maintained its \"Buy\" rating on the stock with a $41 price target. The firm pointed out that Applied Digital's third-quarter performance exceeded expectations, and the company's execution progress is in line with forecasts. It is currently awaiting lease finalization with a hyperscale customer. 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