APLD Stock Breaks Support After 15% Dive as Valuation Concerns Weigh
Applied Digital’s stock cooled off after a strong rally, as concerns over valuation and competitive pressures hit the broader AI sector.
Quick overview
- Applied Digital's stock fell 5% to the mid-$14 range, down nearly 15% for the week amid broader AI sector concerns.
- Despite a recent surge to $17.60, the stock is now trading below long-term resistance levels, raising valuation concerns.
- The company is investing in a $3 billion data center project, Polaris Forge 2, expected to generate significant future revenues.
- Applied Digital's recent Q4 results exceeded expectations, highlighting operational efficiency and expanded agreements with partners.
Applied Digital’s stock cooled off after a strong rally, as concerns over valuation and competitive pressures hit the broader AI sector.
Stock Performance
Applied Digital (NASDAQ: APLD) dropped 5% to the mid-$14 range today and is down nearly 15% for the week. Trading volume was lighter at 15 million shares compared to the 37.5 million average. The pullback comes amid weakness across semiconductor and AI infrastructure stocks, following Alibaba’s launch of a new AI chip.
APLD Chart Daily – The 20 SMA Is Broken
Recent Rally and Valuation
The decline comes just days after APLD surged to a record $17.60, marking a 70% gain in one month. The stock had broken long-term resistance near $15 but is now trading below that level again. Despite a 41.3% year-over-year revenue jump to $38.01 million, Q2 sales fell short of estimates, highlighting concerns over lofty valuations. With a Price-to-Sales ratio of 13.5x versus the industry average of 3.5x, Applied Digital continues to trade at a premium.
Growth Plans: Polaris Forge 2
Applied Digital is doubling down on AI infrastructure with Polaris Forge 2, a $3 billion data center project in North Dakota. Spanning 900 acres and expected to generate 280 megawatts, the facility will employ over 200 people and is set to go live in 2026, reaching full capacity by 2027. The company revealed talks with a major U.S. hyperscaler to anchor the project, which could provide stable long-term revenues.
Earnings Momentum
Applied Digital surprised Wall Street with stronger-than-expected Q4 results, posting a narrower loss of $0.03 per share versus the forecasted $0.14. Operational efficiency and tighter cost management drove the upside. The company also expanded its agreement with CoreWeave, boosting total contract value to $11 billion, with $4 billion in future revenues expected from an enlarged 400 MW IT load capacity.
Broader Industry Note
In a separate development, Sompo Holdings announced its unit Sompo International will acquire Aspen Insurance Holdings Limited for $3.5 billion, underscoring continued deal-making momentum across financial services.
Conclusion: While Applied Digital’s recent dip reflects investor caution after a rapid run-up and growing competition in AI chips, its aggressive expansion plans and strengthened partnerships show the company is still firmly positioned in the AI infrastructure boom. The challenge will be sustaining growth while justifying its premium valuation.
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