Applied Digital: AI or AI-yi-yi-yi?

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Okay, so Applied Digital (APLD +25.50%). They’ve gone from being the place your uncle told you about when Bitcoin was $3, to… well, the place that’s trying to power the robots that will eventually judge us all. They pivoted from keeping the crypto dream alive to building data centers for AI. It’s like going from selling Beanie Babies to building spaceships. The stock price? Let’s just say it’s been a ride. A slightly terrifying, potentially plummeting ride, but a ride nonetheless.

The AI thing is a huge opportunity, obviously. But it’s also a high-wire act performed by a clown who may or may not have remembered to pack a net. One wrong move, one server overheating, and this growth stock could become a very expensive paperweight.

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Why Everyone’s Suddenly Interested in Applied Digital

Applied Digital builds and operates data centers designed specifically for AI workloads. Think of them as the landlords of the digital world, but instead of dealing with leaky faucets and passive-aggressive notes, they’re dealing with terawatts of power and the existential dread of sentient algorithms. They lease space to companies that actually run the servers powering all this AI magic. It’s a surprisingly simple business model, when you break it down. Like, shockingly simple. Which should be a red flag in itself.

AI needs a lot of power and a complex infrastructure. Apparently, not just anyone can just whip up a data center capable of handling that. There are only a handful of companies that can do it at scale. That puts Applied Digital in a pretty good position to ride the AI wave. And they have. Revenue has exploded from $55 million to $264 million in the last four quarters. They’re building capacity like they’re preparing for the digital apocalypse. Which, let’s be honest, isn’t entirely off the table.

The Risks (Because There Are Always Risks)

Look, there’s potential here, but there’s also a whole lot of risk. They’re currently operating at a loss – $125 million in the last 12 months. That’s not ideal. But it’s not necessarily a dealbreaker. They have a path to profitability. The problem is, it’s a path paved with debt and reliant on one very, very large customer.

As of Q1 2024, they had $42 million in debt. Now? Nearly $2.6 billion. That’s a lot of zeros. And it’s not cheap money; most of it is at 9.25% interest. It’s like taking out a payday loan, but for servers.

But the real kicker is their reliance on CoreWeave. This company is responsible for the vast majority of Applied Digital’s future lease income. It’s like putting all your eggs in a basket woven by a spider. And that spider is also deeply in debt. CoreWeave is unprofitable and fueled by… you guessed it, even more debt than Applied Digital. If CoreWeave stumbles, Applied Digital is going to have a very bad day. A very bad day. Think “stock price plummeting into the abyss” kind of bad.

Do I think Applied Digital will go to $0? Probably not. But it’s entirely possible. And frankly, the risk is too high for my comfort. It’s like watching a really good show that you suspect will be canceled after three episodes. You enjoy it while it lasts, but you’re constantly bracing for the inevitable disappointment.

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2026-02-07 21:42