Applied Digital Tackles AI Bottleneck with Revolutionary 1800s Technology

Applied Digital, a leader in the design and operation of data centers, is taking innovative steps to meet the increasing demands of artificial intelligence (AI) workloads. In a significant announcement, the company reported a staggering revenue growth of 250% year-over-year, reaching $126.6 million in the second quarter of fiscal 2026. This surge in revenue reflects an unprecedented demand for AI data centers.

Significant Developments in AI Data Capacity

Applied Digital recently delivered the initial 100 megawatts (MW) of AI computing power to its Polaris Forge 1 campus. Ultimately, this facility aims to provide a total of 400 MW of power to CoreWeave, a major player in the industry. Additionally, a 15-year lease has been signed with an undisclosed U.S. hyperscaler, securing 200 MW at the Polaris Forge 2 campus. This strategic agreement is projected to generate approximately $5 billion in revenue.

Addressing the AI Power Bottleneck

The AI sector is facing a critical bottleneck in power generation, which poses challenges to its growth. While demand for AI data centers continues to rise, conventional electrical grids are struggling to meet the energy needs of these power-hungry facilities. Major technology firms have begun exploring alternative power solutions, such as nuclear energy and gas turbines.

• Meta Platforms has committed to a 20-year agreement with Constellation Energy to rejuvenate a nuclear power plant in Illinois.
• Some companies are even repurposing retired aircraft engines to maintain AI server operations.

However, a shortage of gas turbines could severely limit the expansion capacity for Applied Digital and its competitors. John Ketchum, CEO of NextEra Energy, indicated that a new gas-fired power facility would not be operational until 2032 due to this shortage. As per industry estimates, new gas turbines could take 7 to 8 years to be delivered.

Innovative Solutions Through Steam Turbines

In response to these challenges, Applied Digital is pivoting to an older but effective technology: steam turbines. In November, the company initiated a partnership with Babcock & Wilcox (B&W) to develop 1 gigawatt (GW) of power, utilizing natural gas-fired power plants with steam turbines. B&W has been in operation since 1867 and specializes in steam turbine technology.

These power generation facilities are set to begin operations in 2028, providing a crucial head start over standard gas turbines that could take longer to deploy. Each plant will generate 300 MW of power equipped with advanced boilers and steam turbines, supplied by Siemens Energy.

Future Outlook

By adopting steam turbine technology, Applied Digital aims to bring AI data centers online 3 to 4 years sooner than competitors that rely on traditional methods. This strategy could secure lucrative multi-year contracts with hyperscalers eager to enhance their capacity. As demand for AI computing capacity surges, Applied Digital’s ambitious target of achieving 5 GW of power seems increasingly achievable.

The innovative application of 1800s technology like steam turbines in AI data centers is a testament to Applied Digital’s forward-thinking approach. By solving the power generation bottleneck, the company is well-positioned to lead in the rapidly evolving AI landscape.