To The Moon

Is Applied Digital (APLD) a Golden Opportunity or a Risky Gamble?

The stock market has been buzzing with excitement over Applied Digital (APLD), a data-center operator that saw its shares surge by an impressive 54% on Monday, June 2, 2025. This dramatic rise was triggered by the announcement of a 15-year lease deal with CoreWeave, an AI firm backed by Nvidia, a leader in the AI chip industry. The agreement is projected to generate $7 billion in revenue for APLD, sparking debates among investors: Is this a golden ticket to substantial gains, or has the stock already peaked, making it too late to join the party?

The Catalyst Behind the Surge

The partnership with CoreWeave marks a significant milestone for APLD. As demand for AI and high-performance computing (HPC) continues to soar, data centers like APLD’s are becoming critical infrastructure. CoreWeave’s reliance on Nvidia’s cutting-edge GPUs for AI workloads adds credibility to the deal, given Nvidia’s dominant position in the market. The $7 billion revenue projection—averaging $467 million annually over 15 years—represents a game-changer for a relatively small player in the industry. This influx of cash could fuel further expansion, potentially attracting additional clients and solidifying APLD’s position in the AI-driven economy.

Market Reaction and Valuation Concerns

The 54% stock jump reflects investor enthusiasm, but it also raises questions about whether the stock has become overvalued. If APLD’s current price is near or above $13 (assuming a pre-surge value of $8-9), the talk of hitting $20—mentioned in recent posts—suggests another 50% upside. While achievable in a bullish AI market, such a target hinges on sustained growth and execution. Data-center operations come with high costs—electricity, maintenance, and depreciation—which could erode profit margins if not managed effectively. Additionally, the rapid rise may signal speculative buying, increasing the risk of a pullback if momentum fades.

Long-Term Potential vs. Short-Term Risks

Looking ahead, APLD’s future appears promising if it can capitalize on the AI boom. The industry is projected to grow as companies race to train larger AI models, and APLD’s alliance with Nvidia-backed CoreWeave positions it favorably. However, risks loom large. Execution challenges, such as meeting CoreWeave’s demands or managing rising operational costs, could hinder progress. Competition from giants like Equinix and Digital Realty also poses a threat. Macroeconomic factors, such as interest rate hikes or an AI market correction, could further dampen sentiment toward growth stocks like APLD.

Investment Considerations

For aggressive investors, APLD presents an enticing opportunity. A dip in price could be a strategic entry point to ride the long-term wave of AI adoption. However, cautious investors might prefer to wait, seeking more financial data—such as the next earnings report—to assess profitability and cost control. Key metrics to watch include revenue growth, profit margins, and any new partnerships that could boost APLD’s pipeline.

Conclusion

Applied Digital’s recent surge is a testament to the AI-driven transformation reshaping the data-center industry. The CoreWeave deal offers a solid foundation for growth, with the potential to push APLD’s stock toward $20 or beyond if the company delivers on its promises. Yet, the rapid ascent also warrants caution—overvaluation and execution risks could lead to volatility. For now, a balanced approach—monitoring market trends and company performance—seems prudent. Whether APLD is a golden ticket or a risky gamble, its next moves will be critical in determining its true value in this high-stakes market.