What do you get when a former crypto miner goes all-in on AI data centers… and lands a $7 billion deal in the process? You get a stock that soared from $6.83 to more than $9.
But don’t get too excited just yet there are real risks here, from fierce competition to mounting losses.
Stick around, because I’ll share exactly what I’m watching before I buy.
Applied Digital’s Company Profile
Alright, let’s start with the basics. Who exactly is Applied Digital?
The company is based in Dallas and started out as Applied Blockchain in 2020. Essentially, it was hosting bitcoin mining operations – a fairly standard crypto play during the pandemic.
But in 2022, the company made a significant shift. It retained its ticker symbol but completely rebranded to Applied Digital and focused more on providing infrastructure support for AI and data centers – which you can say is the backbone of the AI space.
The company’s latest data center project is in North Dakota, which takes advantage of the region’s cooler climate to reduce electricity consumption by $50 to $60 million per year – which is quite a lot of savings.
APLD Stock Details
Now, let’s talk about their share prices – because it’s been on quite the ride.
During the pandemic, the Applied Digital skyrocketed along with everything related to crypto-. But like most speculative plays, the stock crashing in 2022 And then traded sideways for months
Then came the AI revolution. Since early 2023, the stock has been rather volatile and increased from about $3 to $9.33 where it is at the time of the recording.
Over the last 3 years, the stock is up 797% and even more impressively, 10,407% over the last 10 years.
Applied Digital’s (APLD) Financials
Alright, now let’s talk about real numbers, or the company’s financials. Because honestly? It’s a mixed bag.
As for the good news, the company’s annual revenue is exploding. They’re up by almost 200% year-over-year to $165.6 million. That impressive growth is one of the reasons behind the stock’s growth.
That said, Applied Digital is burning cash. Over the same period, its operating income widened by 125% – to a loss of $99 million while its bottom line also came out at negative $149 million – more than 3 times the loss in its previous year.
Now over the past month, the stock is down about 25% from its recent highs after the CoreWeave announcement — classic ‘buy the rumor, sell the news.’
By the way, If you want to track Applied Digital’s price action, volatility, or insider activity in real time, I use Barchart. It’s packed with customizable tools and visuals that make spotting technical setups a lot easier.
So yeah, the company is growing pretty quickly, but it is also burning cash.
Risks
Now for Applied Digital, there are some risks to their model that investors need to watch out for.
Going All-In on Data Centers
First up, Applied Digital just announced they’re selling their cloud business to focus entirely on data centers. It even wants to become a REIT.
I think it’s a risky move, because the company is essentially ditching a revenue stream that actually brings them money right now. Perhaps they want to shore up some cash to achieve their future goals.
The Competitions
There’s also competition.
Applied Digital’s top compeititors include Equinix and Digital Reality, and both are international leaders in data center services. Their current setups are for enterprise workloads, but they’re also pivoting to the AI infrastructure space.
Here’s the thing: Equinix has a market cap of around $74 billion and Digital Realty’s is $57 billion. And, Applied Digital? $2.1 billion – a fraction of its biggest competitors. Not to mention, Digital Realty and Equinix both have decades of experience, established connections, and, of course, deeper pockets than Applied Digital.
What Makes Me Hopeful on Applied Digital
Okay, so let’s talk about what the company has going for them as I’m not writing Applied Digital off just yet.
Strong Investor backing
First off, the company has a couple of strong investors backing its business.
For example, Macquarie Asset Management partnered with them to provide up to $5 billion in funding – that’s enough to build 2 gigawatts of data center capacity. Do you think Macquarie will just throw around billions of dollars on pipe dreams? I don’t think so.
Also, Macquarie Asset Management approved $375 million for financing Applied Digital’s Ellendale HPC campus. Again, that’s major institutional money.
And if that’s not all…. NVIDIA owns $59 million worth of Applied Digital shares at the end of 2024. So, when the undisputed king of the AI space invests in a certain company, people pay attention.
Continuing AI Narrative
We also have the company’s AI narrative. I mean, traditional data centers are built for general enterprise needs. But Applied Digital’s facilities are purposely built for AI workloads. They have specialized cooling systems, higher power density, and an environment optimized for GPU clusters.
As AI demand increases, these purpose-built facilities could command premium pricing. It’s like comparing a regular apartment to one specifically designed for gamers – same basic functions, but different value proposition.
Long-Term Revenue Prospects
And lastly, let’s take a look at the company’s smoking gun, their lease agreement with CoreWeave, which caused its stock price to rally lately.
With a potential for $7 billion in revenue over 15 years, the 250 MW facility positions the company as a data center REIT.
Technical Analysis
Now, over the past month, the stock is down about 25% from its recent highs after the CoreWeave announcement – classic “buy the rumor, sell the news”.
That said, if we zoom out to just 3 months, the stock is up over 80% and more than 10,000% over the last 10 years.
Verdict
So what’s my take on the stock? I think this is a classic ‘high-risk, high-reward’ pick.
As far as I see, Applied Digital is either perfectly positioned for the AI market or dangerously overextended. Or maybe both.
What I like about them is that they have real revenue, major backers, and a focused strategy in an exploding market.
What worries me are the cash burn, brutal competition, and, of course, execution risk.
Will I be watching? Absolutely. But will I be buying? Not yet, I’ll wait for them to prove that they can turn revenue into profits. And if they can nail this CoreWeave project? The stock could rip.
