Applied Digital Posts Strong Gains Amid AI Spending Surge
Applied Digital (NASDAQ: APLD) is experiencing notable stock price increases during Thursday’s trading session, climbing 14.5% by 3:30 p.m. ET. In contrast, the S&P 500 rose 1.1%, while the Nasdaq Composite increased by 2.1%.
This bullish momentum is partly driven by a favorable outlook in the artificial intelligence (AI) data center sector. Following recent quarterly releases, both Microsoft and Meta Platforms announced updated guidance that indicates sustained high spending on AI hardware and processing.
Market Optimism Boosted by Tech Giants’ Reports
Microsoft and Meta’s quarterly results appear to ease investor worries about a potential slowdown in AI growth. Despite earlier reports suggesting that Microsoft and Amazon were scaling back on data center leases and infrastructure expansion, their recent capital expenditure (capex) announcements indicate continued significant investment to enhance AI processing capabilities.
Meta provided a substantial revision to its full-year capex forecast in its first-quarter report, now projecting between $64 billion and $72 billion, up from a prior range of $60 billion to $65 billion. Similarly, Microsoft reported Q3 capex of $16.75 billion for the current fiscal year, which concluded on March 31, surpassing analyst predictions of $16.37 billion.
Implications for Applied Digital
The substantial investments in AI infrastructure by Microsoft and Meta serve as encouraging signs for Applied Digital and the broader data center industry. However, challenges persist. Recent quarterly results from Applied Digital revealed sales of $52.9 million, missing the forecasted revenue of $63.4 million. This discrepancy highlights ongoing complexities in assessing demand and performance among smaller companies in the sector.
Investment Considerations for Applied Digital
Before investing in Applied Digital, potential investors might consider that it was not included in a recent top stock recommendation by the Motley Fool’s analyst team. The team has identified ten stocks they believe are positioned for significant returns in the coming years, which does not currently include Applied Digital.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is also a board member. Keith Noonan has no current position in any of the mentioned stocks. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Nvidia, and recommends options related to Microsoft. The Motley Fool has a disclosure policy.
The views expressed are those of the author and do not necessarily reflect the opinions of Nasdaq, Inc.
