APLD · Applied Digital CorporationApplied Digital Corporation
📋 Elon Musk's $134B lawsuit against OpenAI poses downside risk to AI stocks levered to OpenAI (AMD, CRWV, ORCL, MSFT, APLD, CORZ, RIOT) in worst-case scenario, but author expects middle ground with a large fine and MSFT stepping in, limiting contagion
Elon Musk's $134B lawsuit against OpenAI poses downside risk to AI stocks levered to OpenAI (AMD, CRWV, ORCL, MSFT, APLD, CORZ, RIOT) in worst-case scenario, but author expects middle ground with a large fine and MSFT stepping in, limiting contagion.
Evidence & details
- +Hyperscalers may build their own datacenters and drop contracts, akin to Apple dropping Qualcomm.
- +GPUs depreciate over 4 years, affecting full-stack providers.
- +Credit tightening could force dilutive raises or high-interest debt.
- +LLM software breakthroughs could reduce GPU utilization, crashing demand.
- ⚡Hyperscaler vertical integration
- ⚡GPU depreciation curve
- ⚡Credit market conditions
- ⚡LLM efficiency breakthroughs
- −Customer loss to hyperscaler self-build
- −GPU value erosion
- −Dilution or expensive debt
- −Overcapacity from software improvements
Chart
Post Timeline · 2 posts
@LoganMacGregor9 Good question about risk, I enjoy talking about the downsides too. 1. Hyperscalers completely their own datacenter buildout with GPUs (TPUs with $GOOGL, Tranium with $AWS), energy, locations in 5+ years. This is the analogy of Qualcomm with Apple. Apple just u…
Thesis: Lists four main risks for NBIS and other AI infrastructure companies: hyperscaler vertical integration, GPU depreciation, credit tightening/dilution, and overbuildout due to software efficiency breakt…
@koltlj1 $ALPD took on really bad debt with junk bonds at 9.25% and is connected with $CRWV, which also has a lot of bad debt really cutting into margins/FCF + OpenAI (which also doesn't have the funds yet) taking up a lot of backlog + capacity buildout. That kind increases long …
Thesis: Risks highlighted for APLD due to high-interest junk bonds, connection with CRWV's bad debt, and OpenAI's capacity constraints consuming backlog.
Comprehensive cheat sheet comparing neocloud ecosystem companies across market cap, positives, and negatives, highlighting megawatt valuation arbitrage and margin generation as key alpha sources.
source ↗Ranking Neoclouds based on confirmed deals and margins, with positive view on companies with confirmed hyperscaler deals and negative view on CRWV (high debt) and ORCL (low margins, OpenAI contagion).
source ↗APLD selling bonds at 10% yield indicates financial stress, while NBIS, CIFR, WULF maintain healthy balance sheets.
source ↗Post provides a tier list ranking of neocloud sector stocks based on weighted assessments of contract visibility, macro resilience, balance sheet strength, HPC buildout risk, revenue growth trajectory, and market cap relative to revenue ramp. The sector is compelling but some have higher asymmetrical returns.
source ↗Galaxy Digital (GLXY) is rated a grade higher than Applied Digital (APLD) in HPC due to its diversified business segments (brokerage, crypto liquidity) leading to a stronger balance sheet and better FCF, despite similar HPC positioning. It also has long-term hyperscaler visibility with Coreweave, though there is risk Coreweave could go under.
source ↗The Speed Act passing de-risks the Neocloud sector by eliminating delays that cause utilization drag, time-sensitive depreciation costs, and margin issues, benefiting direct beneficiaries like CoreWeave and downstream companies from Applied Digital and Core Scientific.
source ↗Amazon's $10B investment in OpenAI de-risks Neocloud providers like ORCL and CRWV, and hyperscaler ASIC buildout benefits design partners like MRVL and photonics/memory companies, while NVDA loses as OpenAI diversifies away from Nvidia.
source ↗Elon Musk's $134B lawsuit against OpenAI poses downside risk to AI stocks levered to OpenAI (AMD, CRWV, ORCL, MSFT, APLD, CORZ, RIOT) in worst-case scenario, but author expects middle ground with a large fine and MSFT stepping in, limiting contagion.
source ↗No qualifying thesis event for 45+ days.