In the rapidly expanding artificial intelligence (AI) market, two companies, Applied Digital and Nebius, have emerged as notable investment options. Both firms have seen their stock prices more than triple over the past year, sparking interest among investors eager to capitalize on AI’s growth potential. A closer examination of their business models, growth trajectories, and market valuations can provide insights into their investment viability.
Applied Digital has recently shifted its focus from targeting Bitcoin mining and blockchain companies to positioning itself within the cloud, AI, and high-performance computing markets. The company specializes in constructing data center campuses, which it leases to companies that operate their own servers. This pivot in strategy has effectively aligned Applied Digital’s business model more with real estate than traditional tech firms.
Recently, the company announced the launch of Sai Computing, a subsidiary designed to provide cloud-based AI infrastructure using Nvidia’s advanced GPUs. While this new vertical experienced rapid growth, it proved unprofitable and competed with some of Applied Digital’s own hosting clients, including tech giants like Amazon and Microsoft. This internal conflict has prompted the company to spin off its cloud computing operations and merge them with EKSO Bionics Holdings to establish a new entity named ChronoScale.
While this spin-off may hinder Applied Digital’s short-term growth, the core data center leasing business remains strong. The firm has already secured $16 billion in lease payments over the next 15 years, with a significant portion coming from CoreWeave, another fast-growing AI infrastructure service provider. Plans are underway to double the capacity of its Polaris Forge 1 data center to accommodate escalating demand. Applied Digital ultimately aims to transition into a real estate investment trust (REIT), which typically distributes pre-tax income to investors. However, ongoing losses could delay this goal.
For fiscal 2026, analysts anticipate a 38% revenue increase for Applied Digital, projecting total revenues of $297 million, alongside a net loss narrowing to $91 million. With an enterprise value of approximately $8 billion, its current valuation stands at 27 times this year’s estimated sales. Despite the premium, some analysts believe the valuation is justifiable, provided the company reaches over $1 billion in annual revenue.
On the other hand, Nebius, formerly known as Yandex, has also undergone significant transformations. Following sanctions against Russia, this tech firm relocated its operations to the Netherlands, rebranding itself while shedding its Russian assets. Nebius now thrives as a provider of cloud-based AI infrastructure, offering powerful AI servers in its data centers primarily situated in the U.S. and Europe.
As a competitor to companies like CoreWeave, Nebius distinguishes itself by presenting a “full-stack” AI infrastructure model that includes managed software services tailored for specific market needs, such as data training and automation. The company has already begun to secure substantial AI infrastructure contracts from major players like Microsoft and Meta Platforms. Projections indicate that Nebius’s monthly revenue could reach between $7 billion and $9 billion by the end of the year, showcasing immense growth potential.
Analysts forecast a remarkable 521% revenue surge for Nebius in 2026, estimating total revenues of $3.45 billion, and anticipate another 125% growth to $7.8 billion by 2027. Although Nebius is expected to remain unprofitable in the near term as it expands its data center operations, economies of scale may eventually lead to cost reductions.
At an enterprise value of around $24 billion, Nebius is currently valued at approximately seven times its projected sales for the year. Concerns regarding spending and ongoing losses have somewhat tempered its valuation, but its robust growth trajectory positions it favorably in comparison to Applied Digital.
In summary, while both Applied Digital and Nebius have promising futures within the expanding AI sector, Nebius appears to be the more attractive investment option at this moment. Its stronger growth metrics, relatively lower valuation, and clearer strategic direction suggest a favorable outlook for investors compared to Applied Digital, which faces challenges balancing its spin-off with continued expansion and financial sustainability.
