APLD Stock Whiplash: Eyeing $20 Now After Reversing From Record Highs on Renewed Doubt
Applied Digital’s AI data center expansion briefly reignited investor enthusiasm, but a sharp reversal in the stock highlights how fragile..
Quick overview
- Applied Digital's recent AI data center expansion initially boosted investor sentiment, but the stock quickly reversed, highlighting fragile confidence amid execution risks.
- Despite a significant revenue increase and narrowing losses in their latest earnings report, concerns about profitability and capital spending persist.
- The company's ambitious expansion plans, including the Delta Forge 1 campus, face scrutiny regarding timelines and the ability to convert capacity into cash flows.
- A proposed restructuring involving a spin-off and merger introduces strategic options but raises questions about focus and execution risk.
Applied Digital’s AI data center expansion briefly reignited investor enthusiasm, but a sharp reversal in the stock highlights how fragile confidence remains as execution risk and valuation concerns resurface.
A Rally That Quickly Unraveled
Applied Digital’s latest earnings update and confirmation of a new AI-focused data center campus initially provided a powerful boost to sentiment. Shares surged to a fresh record above $42 in late January, reflecting renewed optimism around the company’s role in the rapidly expanding high-performance computing (HPC) and AI infrastructure market. That optimism, however, proved short-lived. Within days, APLD reversed sharply lower, with the stock now dipping below $30 and erasing a significant portion of its recent gains.
The speed of the decline has been as notable as the rally that preceded it. Rather than a gradual reassessment, investors appeared to move swiftly from enthusiasm to caution, underscoring how sensitive high-growth AI infrastructure names remain to shifts in risk appetite.
Market Reacts to a High-Stakes Expansion Update
The catalyst for the late-January surge was Applied Digital’s confirmation that construction had begun on a new large-scale “AI factory” campus. The announcement provided tangible evidence that the company’s long-discussed expansion strategy is moving from concept to execution. After months of volatility, that progress helped stabilize sentiment and attracted momentum-driven buying.
Still, markets approached the news with a degree of restraint. Large-scale AI data centers require immense upfront capital, long development timelines, and reliable access to power—factors that introduce execution and financing risk. While the update strengthened the long-term growth narrative, it also raised expectations around delivery, customer signings, and eventual returns.
Corrections Test Long-Term Conviction
The stock’s late-2025 correction offered an early warning. After topping above $40 in October, Applied Digital lost more than half its value by November as markets broadly rotated away from high-beta AI names. Macro concerns, higher rates, and skepticism around AI monetization timelines all contributed to the selloff.
Technical support eventually formed near the 20-week simple moving average, suggesting that longer-term conviction had not fully disappeared. That base helped fuel the recent rebound—but the latest breakdown raises questions about whether that support will hold if volatility persists.
Earnings Provide Substance, Not Certainty
The company’s fiscal second-quarter 2026 earnings release helped reinforce the scale of the opportunity. Revenue from continuing operations reached $126.6 million, a year-over-year increase of 250%. Losses narrowed meaningfully, with net loss attributable to common shareholders falling 76% to $31.2 million, while adjusted EBITDA turned positive at $20.2 million.
These figures suggest that Applied Digital is making progress toward operating leverage, even as capital spending remains elevated. For supporters of the stock, the results validated the aggressive investment strategy. For skeptics, they confirmed that profitability remains heavily dependent on continued growth and disciplined execution.
A Strong 2025 Raised the Bar for 2026
Applied Digital entered 2026 carrying the weight of exceptional prior performance. The stock surged more than 200% in 2025, making it one of the standout names in the AI infrastructure space. That rally, however, left little room for disappointment.
At recent peaks, APLD traded at roughly 30 times sales, a valuation that assumes smooth project delivery, timely customer onboarding, and sustained demand for AI computing capacity. As a result, sentiment shifted late last year from speculative enthusiasm toward closer scrutiny of funding needs, utilization rates, and returns on invested capital.
Technical Picture Improves, Then Falters
From a chart perspective, the recovery into January looked constructive. Applied Digital reclaimed key levels and pushed decisively above prior highs. The subsequent reversal, however, has been sharp, with shares now more than 25% off their recent peak and once again drifting toward levels last seen during the late-2025 selloff.
APLD Chart Weekly – Will the 20 SMA Bread Tis Time?
Such price action highlights how momentum-driven the stock remains. Without sustained confirmation from contract announcements or clearer visibility on cash flows, technical gains may struggle to hold.
Delta Forge 1 Highlights Both Scale and Complexity
At the center of the expansion is the Delta Forge 1 campus, designed to be supported by roughly 430 megawatts of utility power. Of that total, about 300 megawatts will be allocated to critical IT load, the revenue-generating capacity that directly supports servers and AI workloads.
Applied Digital expects the initial phase to become operational by mid-2027, with further expansion phases planned from 2028 onward. In today’s market, those timelines matter as much as headline capacity. Investors are increasingly focused on how quickly megawatts translate into signed contracts, utilization, and predictable cash flows, rather than simply the size of the buildout.
Strategic Optionality Brings Added Risk
Adding another layer of complexity is a proposed restructuring involving a potential spin-off of Applied Digital’s cloud services unit and a merger with Ekso Bionics to form a new entity, tentatively called ChronoScale. While the proposal introduces strategic optionality and a broader vision, it also raises questions around focus, capital allocation, and execution risk.
For now, Applied Digital sits at a delicate balance point. The growth opportunity in AI infrastructure is substantial, but the market’s reaction suggests that patience is thinning. As 2026 unfolds, confidence will likely hinge less on ambition and more on evidence that scale can be converted into durable, profitable growth.
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