Can Support Hold the APLD Stock after Nvidia’s Exit or Will It Fall to $20?
APLD fell again today after NVIDIA exited its position in Applied Digital Corporation, amplifying investor concerns about valuation...
Quick overview
- Applied Digital Corporation's stock fell sharply after NVIDIA divested its $177 million stake, raising concerns about valuation sensitivity and execution risk in AI infrastructure.
- The abrupt decline in stock price highlights the fragility of investor sentiment, particularly in high-growth sectors reliant on validation from industry leaders.
- Despite recent operational progress and a significant revenue increase, Applied Digital faces scrutiny over its elevated valuation and the need for sustainable cash flows.
- A proposed restructuring adds complexity to the company's narrative, as investors remain cautious about execution risks and capital allocation priorities.
APLD fell again today after NVIDIA exited its position in Applied Digital Corporation, amplifying investor concerns about valuation sensitivity and execution risk in AI infrastructure.
Nvidia’s Exit Shakes Market Confidence
Applied Digital stock slumped in overnight trading heading into Wednesday, opening with an 8% bearish gap after Nvidia disclosed it had divested its $177 million stake in the company. Nvidia had previously held 7,716,050 shares, and its ownership was widely perceived as a strategic endorsement of Applied Digital’s AI data center ambitions.
Because Nvidia plays a central role in AI hardware and ecosystem development, its investments often carry symbolic weight beyond their monetary size. The decision to exit therefore had an outsized psychological impact on sentiment. The filing, released after Tuesday’s close, also showed Nvidia reducing stakes in other companies, including WeRide and Arm Holdings, but the reaction in Applied Digital was particularly pronounced.
The stock is now threatening to fall below the $30 level, with technical risks pointing toward the $20 area should support fail. The abrupt nature of the move underscores how dependent high-growth infrastructure names can be on perceived validation from industry leaders.
A Rally That Quickly Unraveled
Only weeks ago, Applied Digital appeared to be regaining momentum. Following its latest earnings update and confirmation of a new AI-focused data center campus, shares surged to a record above $42 in late January. The rally reflected renewed optimism about the company’s positioning in high-performance computing and AI infrastructure expansion.
Yet the enthusiasm proved fragile. Within days, the stock reversed sharply, sliding below $30 and erasing much of its recent gains. The speed of the decline was notable. Rather than a gradual cooling of sentiment, investors shifted quickly from accumulation to risk reduction.
Such volatility highlights the delicate balance in AI-linked equities. When expectations are elevated, even incremental negative developments—such as a prominent shareholder’s exit—can accelerate downside momentum.
Expansion Ambitions Raise the Stakes
The late-January surge was driven by confirmation that construction had begun on a large-scale “AI factory” campus. For a company often associated with ambitious plans, this marked tangible progress toward execution.
The announcement signaled forward movement and temporarily stabilized sentiment after months of volatility. Investors interpreted the development as evidence that Applied Digital could secure a meaningful foothold in AI infrastructure capacity.
However, hyperscale AI campuses are complex and capital-intensive undertakings. They require substantial upfront investment, reliable long-term power supply, multi-year construction timelines, and clear customer commitments. While the project enhances long-term growth prospects, it simultaneously raises expectations regarding execution, contract wins, and returns on invested capital.
In today’s market, scale alone is insufficient. Investors are demanding evidence that capacity additions will translate into sustainable, predictable cash flows.
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, was sharp, with shares tumbling below $30, however the 100 daily SMA (green) acted as support again, and APLD stock price rebounded from it. But buyers failed to make a new high and on Tuesday APLD formed an upside-down pin candlestick, which signals a bearish reversal, which is taking place today as APLD stock is 4% down after testing the $30 level earlier.
APLD Chart Daily – Can the 100 SMA Hold Again?
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. The 100 daily SMA (green) which has been acting as support, stands close to $30 and if APLD falls below the 100 SMA, then $20 will be the next target.
Earnings Momentum, But Profitability Still Developing
Applied Digital’s fiscal second-quarter 2026 results demonstrated meaningful operational progress. Revenue from continuing operations increased 250% year over year to $126.6 million. Net losses narrowed 76% to $31.2 million, and adjusted EBITDA turned positive at $20.2 million.
These metrics suggest that earlier capital investments are beginning to produce operating leverage. Supporters argue that the company is moving closer to breakeven and that its AI infrastructure strategy is gaining traction.
Yet profitability remains dependent on sustained revenue growth and disciplined cost management. In a market increasingly focused on durable margins rather than expansion at any cost, investors are carefully evaluating whether top-line momentum can convert into consistent free cash flow.
Elevated Valuation Leaves Little Room for Error
Applied Digital entered 2026 following an exceptional 2025, during which the stock surged more than 200%. That performance made it one of the standout names in AI infrastructure but also raised the bar for future execution.
At recent peaks, shares traded near 30 times sales—an aggressive valuation implying smooth project delivery, strong utilization rates, and sustained AI computing demand. When multiples are this elevated, the margin for disappointment narrows considerably.
As sentiment shifted late last year, investors began scrutinizing funding requirements, utilization assumptions, and long-term returns. Nvidia’s exit has intensified that scrutiny, reinforcing the perception that expectations may have outpaced visibility.
Delta Forge 1: Opportunity Meets Complexity
The centerpiece of Applied Digital’s expansion strategy is the Delta Forge 1 campus, designed to operate with approximately 430 megawatts of utility power, including roughly 300 megawatts allocated to critical IT load.
Initial operations are projected for mid-2027, with additional phases extending into 2028 and beyond. In a more selective market environment, timelines and execution milestones carry increasing weight. Investors are focused on how quickly the company can secure binding contracts, achieve high utilization, and generate predictable revenue streams once capacity comes online.
Headline megawatt figures are no longer sufficient to justify premium valuations. Demonstrated customer commitments and disciplined capital allocation will likely determine how the project is ultimately valued.
Strategic Restructuring Adds Another Layer of Risk
Complicating the narrative is a proposed restructuring that includes a potential spin-off of Applied Digital’s cloud services unit and a merger involving Ekso Bionics Holdings, Inc. to create a new entity tentatively named ChronoScale.
While the restructuring could unlock strategic flexibility and sharpen operational focus, it also introduces complexity at a time when investor confidence is already fragile. Structural changes can create uncertainty around capital allocation priorities and management bandwidth.
A More Cautious AI Trade
Applied Digital’s recent trajectory reflects the broader shift in how markets are treating AI infrastructure investments. Long-term demand for AI computing capacity remains compelling, but investors are increasingly sensitive to valuation levels, funding needs, and execution risk.
Nvidia’s divestment does not fundamentally alter the structural AI growth narrative. However, it removes a layer of perceived endorsement that had supported sentiment. In an environment where expectations are high and capital costs remain meaningful, Applied Digital’s ability to deliver consistent execution will likely determine whether confidence stabilizes—or whether volatility persists.
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