Needham supports Applied Digital (APLD.US) and believes that adjusting the lease with CoreWeave could reduce capital costs.

Applied Digital (APLD.US) recently renegotiated the leasing agreement for the data center in North Dakota with CoreWeave (CRWV.US). Investment firm Needham stated that this move is expected to reduce Applied Digital's capital costs. In a report, Needham analysts wrote, "The ultimate effect of this adjustment is that Applied Digital's lenders are now guaranteed by investment-grade (IG) credit entities, rather than CoreWeave's parent company rated BB. This means that over time, the debt costs at the project level for Applied Digital will be reduced." The analysts also stated that a similar situation could occur with Core Scientific (CORZ.US). We believe that credit rating reports show that Core Scientific's data center site in Dalton will support workloads for Meta through CoreWeave. If Core Scientific leases a portion of computing power from CoreWeave, with the end users being investment-grade entities like Meta and Anthropic, then Core Scientific will not only be exposed to CoreWeave's credit risk, potentially creating more favorable financing terms. Following a decline in stock price after reporting third quarter earnings on Thursday, Needham still maintains a "buy" rating for Applied Digital with a target price of $41. The firm noted that the third quarter performance exceeded expectations and the company's execution progress is on track, with anticipation for the landing of contracts with super-scale clients. Needham has a "hold" rating for CoreWeave and a "buy" rating for Core Scientific.