APLD Stock Sinks 12% as CoreWeave Optimism Dies – Heading to $4 Next?
Applied Digital's stock rally collapsed after early excitement over its CoreWeave deal evaporated, underscoring investor worries about...
Quick overview
- Applied Digital's stock price plummeted below $10 after initial excitement over a $7 billion deal with CoreWeave faded.
- The company's shares surged 130% in early June but quickly reversed course following CoreWeave's exit from its ownership stake.
- Investors are concerned about Applied Digital's ongoing financial struggles, including a negative EPS and cash flow issues.
- The future of Applied Digital hinges on its ability to regain investor confidence and demonstrate profitability amid skepticism.
Applied Digital’s stock rally collapsed after early excitement over its CoreWeave deal evaporated, underscoring investor worries about sustainability and profitability.
Applied Digital Reverses Course After Early Surge
Following a dramatic but short-lived surge, Applied Digital Corporation (NASDAQ: APLD) saw investor confidence collapse this month, driving its share price sharply below the $10 mark.
After stalling for nearly two weeks, selling pressure returned with force, pushing the stock down over 12% from the previous week’s close to settle around $9 by Friday. The dramatic reversal caps a volatile period for the stock that had, just weeks earlier, attracted bullish attention for one of the most talked-about deals in the tech infrastructure sector.
The Initial Euphoria: A $7 Billion CoreWeave Deal
Investors were stunned in early June when Applied Digital announced a blockbuster 15-year contract with CoreWeave, the Nvidia-backed cloud computing heavyweight. The agreement called for up to 250 megawatts of data center capacity at Applied’s Ellendale, North Dakota facility, and was estimated to deliver an eye-popping $7 billion in revenue over its lifetime.
APLD Chart Weekly – The Ascending Trendline Comes at $4
The news sparked a furious rally. In the first week of June alone, APLD shares soared about 130%, effortlessly breaking the $12 resistance level and touching an intraday high of $15.42. Both retail traders and institutional investors piled in, betting that Applied had transformed itself overnight into a major AI data center player with guaranteed demand.
Reality Hits: CoreWeave Sells Out
But the optimism didn’t last. On June 10, a Schedule 13G filing revealed that CoreWeave—the supposed transformative partner—had completely exited its ownership stake in Applied Digital. The filing confirmed CoreWeave’s beneficial ownership had fallen to 0.0%, stunning the market.
The sudden exit rattled confidence in the entire deal. Investors began questioning whether the massive contract would truly deliver the promised revenue or even remain intact. The sell-off that followed was sharp, wiping out the bulk of June’s gains and pushing the stock back below the $10 level.
Profitability Concerns Weigh Heavily
Beyond the drama with CoreWeave, Applied Digital also continues to struggle with core financial metrics. The company reported a trailing 12-month EPS of -$1.47, highlighting persistent losses even as revenue remains solid.
More detailed financials reveal underlying challenges: an enterprise value near $2.59 billion comes alongside a sky-high price-to-cash-flow ratio of nearly 100 and a starkly negative return on equity of -89.6. In its latest quarter, free cash flow also turned negative, at approximately -$2.9 million, underscoring liquidity management risks.
Looking Ahead: Can Applied Digital Recover?
For now, Applied Digital remains a battleground stock. While some investors see long-term potential in its AI data center strategy, others worry the CoreWeave saga shows the risks of overhyping unproven deals.
Unless the company can restore market confidence—by delivering meaningful profitability improvements and clarifying the status of its biggest contracts—shares may remain under pressure despite the broader bullish trend in AI-related infrastructure.
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