AI Infrastructure Pivot: Applied Digital vs. Riot Platforms

The global race for artificial intelligence dominance is no longer just about who has the best algorithms; it is increasingly about who controls the physical infrastructure and power required to run them. This shift has created a unique opportunity for companies that originally built massive data centers for cryptocurrency mining. Applied Digital and Riot Platforms, two prominent players in the high-performance computing (HPC) space, are currently at the center of this transition, repurposing their expertise in power management and cooling to meet the insatiable demand for AI-ready data centers.

Applied Digital has emerged as the frontrunner in this pivot, demonstrating a remarkable 250% year-over-year revenue growth in its most recent quarter. The company’s strategy centers on securing long-term contracts with hyperscalers, most notably CoreWeave, which has already occupied space at its Polaris Forge 1 facility. Applied Digital is not slowing down, with Polaris Forge 2 nearing completion and two additional massive facilities, Polaris 3 and Delta Forge 1, slated for 2027. This aggressive expansion is reflected in its stock performance, which has surged 260% over the last 12 months. However, the company recently faced a headwind as regulatory filings revealed that Nvidia, a cornerstone of the AI economy, exited its stake in the firm, causing a temporary dip in market sentiment despite the company's strong fundamentals.

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Analysts have set a median price target of $28 per share, suggesting a potential 95% upside—nearly triple the projected upside for Applied Digital.

Riot Platforms presents a different risk-reward profile. While Applied Digital has moved further into pure-play AI infrastructure, Riot remains heavily tethered to the Bitcoin ecosystem. This exposure has historically been a double-edged sword; while Bitcoin's price appreciation can drive massive revenue, its volatility often weighs on the stock during market downturns. Nevertheless, Wall Street remains exceptionally bullish on Riot’s transition. Analysts have set a median price target of $28 per share, suggesting a potential 95% upside—nearly triple the projected upside for Applied Digital. Riot is leveraging its massive scale and existing energy assets to build out data center operations that can support both mining and AI compute, providing a diversified revenue stream that could stabilize its long-term valuation.

The broader implication of this pivot is the tightening supply of data center capacity. As AI models grow in complexity, the requirements for power density and specialized cooling have moved beyond the capabilities of traditional enterprise data centers. Companies like Applied Digital and Riot are filling this gap by building 'purpose-built' facilities designed specifically for the latest generation of GPUs, such as those from Nvidia and AMD. This 'land grab' for power-connected real estate is likely to lead to further consolidation in the industry, as larger tech giants look to acquire established infrastructure to bypass the multi-year lead times required for new construction.

Looking ahead, investors should monitor the execution of the 2027 facility launches. For Applied Digital, the challenge will be maintaining its growth trajectory without the direct backing of Nvidia. For Riot, the focus will be on whether it can successfully decouple its stock performance from Bitcoin's price swings by proving the viability of its AI compute segments. Both companies represent a high-beta play on the AI infrastructure boom, but their success will ultimately depend on their ability to secure the massive amounts of electricity required to keep the lights on in the age of generative AI.