APLD Stock Attempts Rebound on $11B Deal After 25% Dip, But Valuation Concerns Remain
Applied Digital (NASDAQ: APLD) is navigating a volatile stretch, with shares falling sharply despite major growth initiatives and strong...
Quick overview
- Applied Digital's stock has dropped 25% in two weeks, influenced by insider selling and high valuations despite strong earnings growth.
- The company announced an $11 billion hosting deal with CoreWeave and a $3 billion data center project to support future expansion.
- Despite a 41.3% year-over-year revenue growth, Q2 sales fell short of expectations, raising concerns about the stock's high price-to-sales ratio.
- Applied Digital's future performance will hinge on its ability to achieve sustainable profitability amid increasing competition in the AI infrastructure sector.
Applied Digital (NASDAQ: APLD) is navigating a volatile stretch, with shares falling sharply despite major growth initiatives and strong earnings momentum, as investors weigh insider selling, steep valuations, and heightened competition in the AI infrastructure space.
Stock Performance and Insider Selling
After a robust rally to record highs in August, Applied Digital’s stock has faced steep losses. The shares plunged 25% in less than two weeks, closing at $13.16 yesterday.
The decline was amplified on September 3, 2025, when CEO Wes Cummins sold 400,000 shares at an average price of $15.26, totaling $6.1 million. Although the stock opened higher the following session, the selling activity rattled investor sentiment at a time when semiconductor and AI infrastructure names were already under pressure following Alibaba’s unveiling of a new AI processor.
Valuation Pressures and Rally Context
APLD recently announced a landmark $11 billion hosting deal with CoreWeave, cementing its position in the high-performance computing (HPC) space for blockchain and cryptocurrency applications. The partnership puts Applied Digital in the same league as Core Scientific and TeraWulf, signaling ambitions to scale aggressively.
Despite revenue growth of 41.3% year over year to $38.01 million, Q2 sales still fell short of expectations, raising red flags about lofty valuations. The stock trades at a price-to-sales ratio of 13.5x, significantly above the industry average of 3.5x, making it vulnerable to profit-taking after its sharp run-up to $17.60 last month.
Growth Plans: Polaris Forge 2
To support future expansion, Applied Digital unveiled the $3 billion Polaris Forge 2 data center project in North Dakota. Spanning 900 acres and employing over 200 people, the facility is expected to deliver 280 MW of capacity once fully operational by 2027.
The company also revealed discussions with a major U.S. hyperscaler to anchor the project, which could provide a reliable revenue stream and enhance investor confidence in long-term prospects.
Earnings Momentum
Applied Digital surprised Wall Street with stronger-than-expected results in Q4. Losses came in at just $0.03 per share, compared with the forecasted $0.14 loss, thanks to tighter cost discipline and improved operational efficiency.
The company also extended its partnership with CoreWeave, pushing the contract value to $11 billion and expanding load capacity to 400 MW, potentially unlocking an additional $4 billion in future revenue.
Industry Context
Beyond the AI sector, deal-making momentum in financial services remained strong as Sompo Holdings announced a $3.5 billion acquisition of Aspen Insurance Holdings through its subsidiary Sompo International. This highlights a broader appetite for strategic consolidation across industries.
Conclusion: Applied Digital’s story reflects the tension between rapid growth and market caution. While groundbreaking deals, ambitious infrastructure projects, and improving earnings bolster the bull case, insider selling and stretched valuations fuel skepticism.
For investors, the stock’s trajectory will depend on whether Applied Digital can translate bold expansion into sustainable profitability while navigating intensifying competition in the AI infrastructure race.
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