We came across a bullish thesis on Applied Digital Corporation (APLD) on Value Investing Subreddit Page by DoU92. In this article, we will summarize the bulls’ thesis on APLD. Applied Digital Corporation (APLD)’s share was trading at $9.52 as of Dec 9th.
A panoramic aerial view of a modern data center with high-performance computing.
Applied Digital Corporation (APLD) stands out as a unique player in the rapidly evolving AI ecosystem, focusing on building the infrastructure that powers AI-driven technologies. Unlike companies producing AI applications or tools, APLD provides the critical backbone through its advanced data center solutions tailored for high-performance computing (HPC) and AI workloads. The company operates three distinct segments: blockchain data center hosting, cloud services via its Sai Computing brand, and HPC hosting, which designs and operates cutting-edge facilities optimized for AI and machine learning applications. This diversified approach positions APLD as a vital enabler of the AI revolution.
APLD’s strategic pivot towards AI-driven growth has been transformative. The company has rapidly expanded its data center capacity to meet soaring demand for AI processing power, resulting in impressive revenue growth. Its shift toward AI and HPC markets has not only bolstered topline performance but also improved profitability, with adjusted operating income turning positive. Despite this progress, APLD remains undervalued, trading at a forward price-to-sales ratio below 1, signaling significant potential for stock price appreciation. Analysts are notably bullish, with price targets suggesting upside exceeding 200%, reflecting confidence in the company’s growth trajectory.
The scalability of APLD’s infrastructure further strengthens its investment appeal. Its ability to quickly adapt and expand operations to meet increasing demand provides a durable competitive advantage. However, potential risks include intense competition in the data center space, rapid technological advancements, and macroeconomic uncertainties that could impact demand for AI services.
Overall, APLD represents a compelling opportunity for investors seeking exposure to the infrastructure underpinning the AI market. With strong fundamentals, a scalable business model, and favorable analyst sentiment, APLD is well-positioned to capitalize on AI’s explosive growth and deliver substantial returns for shareholders.
Applied Digital Corporation (APLD) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held APLD at the end of the third quarter which was 29 in the previous quarter. While we acknowledge the risk and potential of APLD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than APLD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.