So, APLD Stock Went Nuts: The AI Deal, The Earnings Beat, and Why I'm Not Buying It

So, a company you'd never heard of six months ago, Applied Digital (APLD), is up around 280% this year. Let that sink in. The stock chart looks less like a business and more like a rocket launch sequence drawn by a hyperactive kid.

The story they’re selling is simple, seductive, and perfectly timed for an era of peak AI hysteria. They used to be a crypto-hosting company—a business model about as stable as a Jenga tower in an earthquake. Now, they've "pivoted." They're building massive "AI Factories" in the middle of nowhere, North Dakota, to be exact.

On October 9, they dropped quarterly earnings that blew past Wall Street’s low-ball estimates, sending the stock into another frenzy. Revenue of $64.2 million against a $50 million guess. A smaller loss than expected. The crowd goes wild. The stock, already levitating, does another little jump in after-hours trading.

Everyone, it seems, is buying the story. But I'm not. Because when a story sounds this perfect, my gut tells me to check for the fine print. And with Applied Digital, the fine print is a novel written in red ink.

The "Picks and Shovels" Fantasy

CEO Wes Cummins loves to say his company is selling the "picks and shovels of the intelligence era." It’s a great line. No, "great" isn't the word—it's a perfect line for a PowerPoint slide shown to people desperate to believe they've found the next NVIDIA. It conjures images of the Gold Rush, where the smart money wasn't in digging for gold but in selling gear to the suckers who were.

Let’s translate that PR-speak. Applied Digital isn't inventing AI; they're essentially a hyper-specialized real estate developer. They're building the giant, power-hungry warehouses that companies need to run thousands of GPUs. This pivot away from their "floundering" Bitcoin hosting roots is being hailed as genius. But is it? Or is it just a desperate leap from one hype bubble to another? This whole thing feels less like a strategic masterstroke and more like a guy who sold faulty pickaxes during the California Gold Rush suddenly rebranding as a high-tech drilling equipment supplier for the oil boom. Same guy, different sales pitch.

The numbers they just posted are supposed to be the proof. But look closer. Revenue is soaring, sure, but so are costs. Selling, general, and administrative expenses exploded by 165% year-over-year. They're burning cash to build these things, and while they nearly broke even on an adjusted EBITDA basis (finance's favorite magic trick), they still posted a net loss of nearly $28 million.

This is the classic growth-at-all-costs playbook. Spend a dollar to make eighty cents, but promise everyone that one day, you'll be making two dollars. It works until it doesn't. And how much of this new "AI revenue" is just one-time installation fees for their big client? How sustainable is that, really?

One Tenant, One Prayer, and a $5 Billion Lifeline

Here's the part of the story that should have every investor waking up in a cold sweat. The entire bull case for Applied Digital rests on the shoulders of one company: CoreWeave.

CoreWeave, a fast-growing AI cloud provider, signed 15-year contracts to lease 400 megawatts of capacity at APLD's North Dakota campus. This deal is supposedly worth a staggering $11 billion in future revenue. It sounds incredible. It is incredible. It’s also an unbelievable concentration of risk. Applied Digital isn't a diversified landlord with a portfolio of tenants; its just a landlord who built a billion-dollar palace for a single family that's paying rent with venture capital money. What happens if CoreWeave stumbles, gets acquired, or finds a cheaper landlord in five years? What happens to that $11 billion number then?

Of course, the bulls will point to the new financing deal with Macquarie Asset Management, a $5 billion facility to fund new "AI Factory" campuses. They'll also point to things like a New Analyst Forecast: $APLD Given $35.0 Price Target. See? The smart money believes! But what is this deal, really? It’s a "perpetual preferred equity facility." That's not a friendly bank loan. That's expensive, high-level financing from one of the biggest infrastructure investors on the planet, an entity that is absolutely not in the business of losing money.

They've structured it at the "asset level," which is a fancy way of saying if this whole thing goes belly-up, Macquarie gets the keys to the data centers before common shareholders like you get a penny. Is this a vote of confidence, or is Macquarie just the smartest loan shark in the room, ensuring they get their pound of flesh no matter what?

Let's not forget, this company was the target of a brutal short-seller report in 2023 by Wolfpack Research, which called it an "embarrassing and predictable stock promotion." A class-action lawsuit followed, alleging the company misled investors. APLD denied everything, and the stock's recent performance has certainly made the shorts look foolish for now. But those questions about governance and overhyped claims haven't just vanished. They're still lingering, buried under a 280% gain.

Then again, maybe I'm the crazy one here. Maybe this really is the future and I'm just the old guy yelling at a cloud... a literal, GPU-powered AI cloud. But I've seen this movie before.

So We're Just Pretending This Is Fine?

Let's be brutally honest. Applied Digital is a story stock, a momentum play fueled by the biggest tech narrative of the decade. The market isn't valuing a business; it's valuing a dream. The dream is that the demand for AI compute is infinite, that APLD will execute flawlessly on billions in construction, and that its key client will thrive for the next 15 years. That ain't an investment thesis. That's a prayer. When the AI hype cycle cools—and it will—and people start asking hard questions about profitability and cash flow, a lot of people are going to be left holding very expensive shares in very empty buildings in North Dakota.