APLD Stock Just Rocketed on an $11B Deal: So, What's the Catch?

This AI Stock Is Up 300%. Here's Why You're Probably the Sucker.

Let’s get one thing straight. When a stock that was trading for pocket change a year ago suddenly rockets up 300%, 350%, whatever insane number they’re throwing around this week, it’s not because the company discovered cold fusion. It’s because a story got told, and a whole lot of people decided to believe it at the exact same time.

Right now, that story belongs to Applied Digital (APLD).

You’ve seen the chart. It looks like a goddamn EKG reading during a heart attack. After years of bumping around in the bargain bin, APLD has become Wall Street’s new golden child, the "picks and shovels" play for the great AI gold rush. The stock hit all-time highs, analysts are screaming "Buy!", and your cousin who just discovered Robinhood is probably texting you about it.

And me? I’m here to tell you to take a deep breath before you become the guy who buys at the absolute top. Because every gold rush needs its marks, and the market is getting very, very good at finding them.

The $11 Billion Handshake

The centerpiece of this whole frenzy is an $11 billion deal with a company called CoreWeave, an AI-cloud specialist that’s also backed by the high priests at Nvidia. On paper, it’s a monster. APLD is building these massive "AI factories" out in the middle of North Dakota—I can just picture the lonely, humming server racks freezing in the prairie wind—and CoreWeave has promised to rent a huge chunk of one for the next 15 years.

This, we are told, validates APLD’s pivot from its old life as a crypto-mining host. Funny how fast you can find a new religion when the collection plate for the old one runs dry, isn't it?

CEO Wes Cummins calls his company the “modern-day picks and shovels of the intelligence era.” It’s a great line. It sounds smart. It makes you feel like you’re investing in the bedrock of the future. But here’s my cynical translation: "We’re the landlords for a tenant whose business is based on the hottest, most speculative technology on the planet."

That $11 billion figure is the headline, but it’s stretched over 15 years. That's a long, slow drip, not a firehose of cash. And it all hinges on CoreWeave not finding a better, cheaper, or faster landlord in the next decade and a half. What are the escape clauses in that contract? What happens if the AI boom cools and the demand for GPU-heavy computing doesn't grow to infinity? Nobody talking up the stock seems too concerned with those questions. They just see the big number and start drooling.

This is a risky bet. No, 'risky' is what you call playing blackjack. This is strapping yourself to a rocket built by a company that, just a couple years ago, was in a completely different business, hoping it reaches orbit before it runs out of fuel or just… explodes.

Wall Street's Standing Ovation

Naturally, the professional hype machine is in full swing. About a dozen analysts have slapped a "Buy" or "Strong Buy" rating on APLD. One firm, Roth Capital, even jacked its price target up to a comical $56 a share.

Now for the punchline. The consensus 12-month price target—the average of all these brilliant minds—is around $25. As I’m writing this, the stock is trading well above that. Let me repeat that, just so it sinks in. The same people telling you to buy the stock are, on average, predicting it will be worth less a year from now.

Give me a break. This is the oldest game on Wall Street. It's like getting restaurant reviews written by the chef's mom. Of course it’s five stars, honey! Now please, buy the stock so our investment banking division can collect fees on the next share offering.

And they will need more offerings. Building these data centers costs billions. APLD is taking on massive debt and raising hundreds of millions from financing facilities and stock sales. That means your slice of the pie gets smaller every time they print new shares to pay for the construction. This aint a game for the faint of heart, and the company's balance sheet has more red flags than a Soviet parade. They have to get this perfect.

The valuation is just absurd. A price-to-sales ratio of 38 for a company that isn't even profitable? You’re not buying a business at that point; you’re buying a lottery ticket based purely on a story. A story that better come true, down to the last letter.

The Ghosts in the Machine

Let’s not forget the skeletons. Last year, APLD was targeted by short-sellers who accused the company of exaggerating its AI pivot and questioned some of its deals. This led to the inevitable class-action lawsuit. The company, ofcourse, denies all wrongdoing and says its recent success is proof the shorts were wrong.

Maybe they were. Or maybe they were just early.

The bull case for APLD requires flawless execution. They have to build these gigawatt-scale campuses on time and on budget in a world where everyone is fighting for the same contractors, materials, and power grid access. They have to keep their main tenant, CoreWeave, happy for 15 years. And they have to do it all while managing a mountain of debt. If they slip up even once...

Then again, maybe I'm the crazy one here. I probably would have said the same thing about Amazon in 2001 or Nvidia when it was a fraction of its current price. It's easy to be a cynic and miss the rocket ship entirely. But it's even easier to be a believer and end up holding a bag of worthless stock when the music stops.

The real question isn't whether APLD could become a critical piece of AI infrastructure. It might. The question is whether that possibility is already priced in, three times over.

So, You Feeling Lucky?

Look, I get the appeal. The story is intoxicating. AI is the future, data centers are the real estate of that future, and APLD is building the biggest mansions on the block. But when a stock's price becomes completely detached from its current financials, you're no longer investing. You're gambling on momentum. You're betting that there's a "greater fool" out there who will buy your shares for a higher price tomorrow. Right now, there are plenty of them. But that line can get awfully thin, awfully fast. Buying APLD today is a bet that the hype train has a few more stops before it flies off the rails. Just make sure you know where the emergency exit is.