Applied Digital (APLD) Pushes Ahead In AI Data Centers, Is The Valuation Already Too Rich?

Investor attention has turned back to Applied Digital (APLD) after fresh commentary on its push into AI focused data center operations, where long term leases and large buildouts now sit alongside concerns about valuation and execution.

Applied Digital’s share price has pulled back sharply in recent months, with a 90 day share price return down 47.14% and shorter term weakness adding to the pressure. However, the 1 year total shareholder return of 58.57% and a very large 3 year total shareholder return of 338.41% show that longer term momentum remains strong even as investors reassess the stock against its current valuation and execution risks.

Spot 56 AI infrastructure stocks that, like Applied Digital, are tied to the AI buildout story and may offer different combinations of valuation, contract visibility, and execution risk.

Applied Digital has already delivered a very large multi year run, yet the recent pullback and rich AI data center story leave investors weighing how much upside is still ahead versus how much is already in the price. The valuation work starts at this point.

Most Popular Narrative: 65.5% Undervalued

Applied Digital’s most followed narrative pitches a fair value of $73.36 against a last close of $25.34, which puts a lot of weight on long duration AI data center contracts and future profitability.

The company has recently secured long-term (15-year) leasing agreements with CoreWeave, a major AI hyperscaler, for its purpose-built AI/HPC data center campus, Polaris Forge 1, representing a total of $7 billion in contracted revenue and a multi-year, recurring, and predictable revenue stream that directly supports future revenue growth and cash flow stability.

Read the complete narrative.

Want to see what sits behind that fair value for Applied Digital? The narrative leans on rapid revenue expansion, a swing to profitability, and a rich future earnings multiple. The exact mix of growth, margins and discount rate is what drives the $73.36 figure.

Result: Fair Value of $73.36 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Applied Digital’s heavy use of debt and reliance on a small group of large hyperscaler and crypto customers could quickly challenge that upbeat fair value story.

Find out about the key risks to this Applied Digital narrative.

Another View on Applied Digital’s Valuation

The narrative around Applied Digital leans heavily on long term AI contracts and future earnings, yet the current P/S ratio of 12.1x paints a different picture. It is higher than the estimated fair ratio of 10.6x, the US IT industry average of 1.8x, and a peer average of 6.1x. That gap suggests investors are already paying a premium. The key question is whether you believe the business can grow into that pricing or if expectations are running too far ahead.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

With Applied Digital drawing mixed reactions, it makes sense to review the facts and decide quickly where you stand. To weigh both sides of the story, take a closer look at the company's 1 key reward and 3 important warning signs

Looking for more investment ideas beyond Applied Digital?

If you stop with Applied Digital, you risk missing other opportunities that could fit your goals just as well or even better.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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