We recently published a list of Complete List of All AI Companies Under $2 Billion Market Cap. In this article, we are going to take a look at where Applied Digital Corporation (NASDAQ:APLD) stands against other AI companies under $2 billion market cap.
It’s clear that AI holds immense promise but it comes with significant risks. Some of the concerns that the market has include overreliance on a few key players, shifts in demand toward smaller competitors, and the broader impact of AI-driven market trends on earnings and valuations. While AI offers opportunities, managing risks such as customer concentration, economic headwinds, and market volatility will be crucial for its sustainable growth and integration.
Navigating AI Expectations and Market Dynamics
On CNBC ‘Fast Money,’ a discussion between traders highlighted concerns about elevated expectations for AI, especially in the chip market, with NVDA as a prime example. Past patterns in the semiconductor giant’s stock suggest potential declines, with customer concentration being a significant risk. Some believe demand for high-end chips could shift to smaller semiconductor companies. They also discussed that broader market performance might improve as other sectors gain traction, especially during earnings season, which is expected to influence investor sentiment more than AI and GLP-1 trends.
They mentioned that the key risks for earnings include the strong U.S. dollar, rising rates, and policy uncertainties, which may impact large-cap companies. While recent PPI data offered some relief, the bond market remains firm, with 10-year yields approaching 5%. Expectations for CPI and PCE figures are mixed, with potential reacceleration seen as a headwind for markets in a higher rate environment. Earnings and economic data were considered critical factors to watch by the traders.
Our Methodology
For this article, we scoured our database as well as several ETFs and media reports to find all possible AI stocks under $2 billion. We then listed the stocks in ascending order of their market cap. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An overhead view of a large-scale data center with rows of servers and blinking lights.
Applied Digital Corporation (NASDAQ:APLD)
Market Capitalization: $1.904 Billion
Number of Hedge Fund Holders: 26
Applied Digital Corporation (NASDAQ:APLD) specializes in developing and operating next-generation data centers and cloud infrastructure. Its custom-designed facilities are built to optimize accelerated computing and provide secure, scalable digital hosting services, including CSaaS and GPU-as-a-Service. With extensive hyperscale experience and a strong power supply pipeline, Applied Digital focuses on supporting demanding AI/ML, blockchain, and high-performance computing (HPC) workloads, including AI factories.
In December 2024, Applied Digital reached an important milestone in its Ellendale, N.D., data center project by successfully energizing its main substation transformer. This step moves the facility closer to supporting advanced AI and high-performance computing. The milestone was celebrated with partners, including Montana-Dakota Utilities and the local community. Applied Digital also requested annexation to Ellendale to increase local revenue and services.
Analyst Darren Aftahi of Roth MKM keeps a positive outlook on Applied Digital (NASDAQ:APLD), which is based on the company’s financial restructuring, including revised depreciation schedules that are expected to improve AI Cloud segment profitability and refinancing of debt, positioning the company for growth. Aftahi also sees potential revenue growth from the expanding AI Cloud business and steady Bitcoin hosting revenues, with the broader industry, especially Microsoft’s investments in AI data centers, expected to drive increased demand. Aftahi maintains a Buy rating on the company stock with a $13 price target.
Overall, APLD ranks 1st on our list of the 59 AI companies under $2 billion market cap. While we acknowledge the potential of APLD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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 is originally published at Insider Monkey.