Up 375%, Should You Buy Applied Digital Right Now?

Applied Digital (NASDAQ: APLD) is attracting capitalist attraction these days for its relation successful gathering and operating artificial quality (AI) information centers. The institution provides unreality infrastructure that's utilized by galore of the world's starring AI companies. And it has a cardinal concern with apical AI accelerator decorator Nvidia that gives it entree to the graphics processing units (GPUs) it needs to powerfulness that infrastructure.

As request for AI information halfway capableness has surged, Applied Digital's stock terms has risen sharply. It's up by 375% implicit the past 12 months alone. But contempt these awesome returns, the concern exemplary has important drawbacks and faces superior imaginable headwinds.

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Here's wherefore Applied Digital banal astir apt isn't worthy buying close now.

Applied Digital builds information halfway infrastructure and leases the computing powerfulness to a slew of exertion companies, including CoreWeave -- and concern has been booming.

In its fiscal 2026 2nd quarter, which ended Nov. 30, the company's income surged 250% to astir $127 million. It has besides been expanding its information halfway footprint and signing multiyear leasing agreements with customers. For example, its lease agreements with CoreWeave could make up to $16 cardinal successful gross implicit 15 years.

Applied Digital is intelligibly benefiting from request for AI infrastructure, and it's betting that it volition proceed to turn arsenic much tech companies walk wealth for AI processing power. For example, Nvidia's absorption has forecast that artificial quality infrastructure spending could scope betwixt $3 trillion and $4 trillion implicit the adjacent 5 years.

It's understandably tempting to bargain AI stocks that person been steadily posting awesome returns -- it tin look similar specified equities person obscurity to spell but up. However, erstwhile it comes to Applied Digital, determination are important reddish flags that shouldn't beryllium overlooked.

The archetypal is that portion its income are expanding quickly, its spending is expanding rapidly arsenic well, and the institution is not profitable. It's a problematic motion erstwhile a company's income summation by 250% and successful the aforesaid quarter, its full expenses besides emergence by 230% -- successful this case, to astir $158 million.

Applied Digital narrowed its bottom-line nonaccomplishment successful its fiscal Q2, which was good, but it inactive reported a non-GAAP diluted nonaccomplishment of $0.07 per share. That's a occupation due to the fact that the roar signifier of the AI rhythm is good underway. If determination were ever a clip erstwhile a institution similar Applied Digital ought to beryllium capable to crook a profit, it's close now.