Applied Digital Secures $160M Investment Backed by NVIDIA to Expand Bitcoin Mining and HPC Infrastructure
Applied Digital, a data centre operator specializing in bitcoin mining and high-performance computing (HPC), has successfully secured $160 million in a private placement financing deal. This investment, backed by chip-making giant NVIDIA and other institutional investors, marks a significant step in the company’s expansion plans.
The financing agreement, announced on Thursday, involves the issuance of nearly 50 million shares of Applied Digital's common stock at $3.24 per share, reflecting the closing price from the previous day. Alongside NVIDIA, the investment group includes Related Companies, a privately owned real estate firm based in New York.
Following the announcement, Applied Digital’s stock price (NASDAQ: APLD) experienced a notable surge, climbing 65% to close at $5.15 per share.
Planned Use of Funds
The company plans to utilize the new capital to bolster its financial standing and expand its infrastructure. The funds will be directed toward enhancing its HPC data center infrastructure and advancing its GPU cloud solutions. This move follows Applied Digital’s recent issuance of $53.2 million in convertible preferred stocks to a single investor, aimed at supporting HPC and AI data centre growth.
Company Evolution and Business Focus
Founded in 2021, Applied Digital initially focused on GPU cryptocurrency mining through a partnership with Sparkpool, an Ethereum mining pool that has since ceased operations. By 2022, the company shifted its focus to bitcoin mining colocation services, working with major players like Marathon Digital. Since 2023, Applied Digital has broadened its scope to include cloud services and is in the process of constructing new HPC hosting facilities.
Despite its expansion into HPC colocation and cloud services, Applied Digital remains heavily reliant on bitcoin mining hosting. For the fiscal year ending in May 2024, the company reported total revenue of $165 million, with a substantial 83% ($137 million) derived from its bitcoin mining hosting business. The remaining 17% came from cloud services.
Customer Concentration Concerns
Applied Digital’s annual report highlights a significant customer concentration within its crypto data center hosting business. The report notes that all seven of its clients in this segment have collectively contracted the full capacity of its two data center facilities. Notably, one client, believed to be Marathon, contributes approximately 62% of the company’s revenue, amounting to about $102 million for the year ending May 2024.
Additionally, the company disclosed similar customer concentration in its cloud services segment, with only two clients currently utilizing its offerings.
