Saturday, July 5, 2025

Has This AI Stock’s Luck Finally Run Out?

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Has This AI Stock's Luck Finally Run Out?

Anthony Summers, Director of Trading, The Oxford Club

Anthony Summers

When we last looked at Applied Digital (Nasdaq: APLD) back in December, the AI data center company was riding high on artificial intelligence fever. The stock had surged over 350% in less than a year as investors got swept up in the company's data center ambitions.

Fast-forward to today, and - as you'll see in a moment - the picture looks quite different.

Applied Digital builds and operates next-generation data centers designed for high-performance computing and AI applications. The company also provides cloud services for AI and machine learning workloads. Think of it as the digital infrastructure backbone that powers today's AI revolution.

But lately, that revolution seems to have stalled for Applied Digital shareholders. After touching highs above $13 earlier this year, the stock has tumbled back to around $10 as reality has set in about some of the company's financial challenges.

Chart: Applied Digital (Nasdaq: APLD)
View larger image
 

Applied Digital's latest quarterly results tell a mixed story. Revenue jumped 22% year over year to $52.9 million in the fiscal third quarter, which sounds impressive until you dig deeper and see that the company posted a net loss of $36.1 million.

Even more concerning is what's happening with cash flow. Applied Digital has now burned through cash in each of the past four quarters, with no sign of improvement. This cash burn becomes especially worrying when you consider the company's ambitious expansion plans.

On the positive side, management has been busy securing financing. They closed a $375 million deal with Sumitomo Mitsui Banking Corporation and announced a potential $5 billion investment agreement with Macquarie Asset Management. These partnerships provide much-needed capital but also highlight just how much money the company needs to fund its growth.

Applied Digital is also making strategic moves, including plans to sell its Cloud Services Business to focus on data centers. This could help streamline operations, but it also means giving up a revenue stream that grew 220% year over year.

So... what does The Value Meter say about all this?

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