Applied Digital made a splash in the final trading days of 2025, announcing plans to spin off its cloud computing business and merge it with medical robotics company Ekso Bionics to create a new publicly traded entity called ChronoScale Corporation.
The transaction, which is expected to close in the first half of 2026, would separate Applied Digital's accelerated compute platform from its data center development operations. Applied Digital shareholders would own approximately 97% of ChronoScale following the deal, with Ekso Bionics contributing its public company structure.
Shares of Applied Digital rose more than 3% on the news, while Ekso Bionics stock surged 51% as investors bet on the transformative potential of the combination.
The Strategic Rationale
Applied Digital has operated two distinct business lines: developing and owning data center facilities, and running a cloud computing platform that provides GPU-powered infrastructure to AI companies. The spinoff is designed to let each business pursue its own growth trajectory independently.
"By separating the accelerated compute platform from Applied Digital's data center ownership and development business, the proposed transaction will allow each business to scale independently, pursue distinct growth trajectories, and operate with greater strategic and capital flexibility," the company stated in its announcement.
The cloud business, which will become the core of ChronoScale, generated approximately $75.2 million in revenue over the twelve months ending August 31, 2025. While modest by tech industry standards, the business has grown rapidly as demand for GPU computing has exploded.
First-Mover Advantage
Applied Digital Cloud was among the first platforms to deploy Nvidia's H100 GPUs at scale when they launched in 2023, giving the company a reputation for sourcing and deploying cutting-edge hardware ahead of the broader market. This capability is increasingly valuable as AI companies compete for scarce GPU capacity.
ChronoScale is being positioned as "an accelerated compute platform purpose-built to support the most demanding artificial intelligence workloads." The company plans to deliver scalable GPU-based infrastructure optimized for AI training, inference, and high-performance computing.
Why Ekso Bionics?
The choice of Ekso Bionics as a merger partner may seem puzzling at first glance. Ekso is a developer of exoskeleton technology for medical and industrial applications—seemingly unrelated to AI computing infrastructure.
The logic, however, is primarily structural. By merging with an existing public company, ChronoScale can become publicly traded without the time, expense, and uncertainty of a traditional IPO. This "reverse merger" approach has become increasingly popular as the IPO market has remained challenging.
For its part, Ekso Bionics will explore selling all or a substantial portion of its existing exoskeleton business. The company would essentially become a shell that ChronoScale fills with its AI computing operations.
Market Opportunity
The transaction comes at a time when demand for AI computing infrastructure is at unprecedented levels. The world's largest technology companies are spending hundreds of billions of dollars annually on data centers and AI hardware, and the demand shows no sign of slowing.
Enterprise and AI-native companies are increasingly seeking alternatives to the major cloud providers. Specialized platforms like the one ChronoScale plans to offer can provide dedicated GPU capacity without the complexity and cost of building internal infrastructure.
Bank of America estimates that a typical 1-gigawatt AI data center requires upwards of $60 billion in capital expenditure, with roughly half going to hardware. Platforms that can aggregate this capacity and offer it on-demand to AI developers fill a critical market need.
Transaction Details
The deal remains subject to customary due diligence, negotiation of definitive agreements, and necessary regulatory and shareholder approvals. Applied Digital expects the transaction to close in the first half of 2026.
Following the spinoff, Applied Digital would continue to operate its data center development business independently. The company has been building a pipeline of powered data center capacity to serve the growing needs of AI and cloud computing companies.
Investor Considerations
For Applied Digital shareholders, the spinoff represents a bet that the sum of the parts is worth more than the whole. The data center development business and cloud computing platform have different risk profiles, growth trajectories, and investor bases. Separating them could allow each to attract its optimal valuation.
However, investors should note that the transaction is not yet finalized. The non-binding term sheet announced today must still be converted into definitive agreements, and the deal could fall apart or be substantially modified during the due diligence process.
The relatively small scale of the cloud business—$75 million in annual revenue—also raises questions about ChronoScale's ability to compete with larger, better-capitalized rivals in the AI infrastructure space.
The Bottom Line
Applied Digital's spinoff announcement reflects the increasingly creative approaches companies are taking to participate in the AI infrastructure boom. By separating its cloud computing platform into a dedicated public company, Applied Digital is betting that focused, pure-play entities can attract premium valuations in today's market.
Whether ChronoScale can fulfill its ambitious vision of becoming a leading AI compute platform will depend on its ability to scale rapidly, secure access to next-generation hardware, and compete effectively against much larger cloud providers. The market's enthusiastic initial reaction suggests investors are willing to give the new company a chance to prove itself.
