Why Did Applied Digital Stock Skyrocket 34.5% This Week?

Key Points

• Microsoft has inked a $17.4 billion, five-year infrastructure deal with the AI computing company Nebius.

• This gave investors confidence that demand for AI data centers remains strong.

• 10 stocks we like better than Applied Digital ›

Shares of Applied Digital (NASDAQ: APLD) flew higher this week, finishing up 34.5%. The spike came as the S&P 500 and the Nasdaq-100 were up 1.6% and 1.9%, respectively.

The artificial intelligence (AI) data center company saw its shares jump this week after a massive deal was announced between Microsoft and AI cloud provider Nebius, indicating that data center demand remains white-hot.

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Nebius and Microsoft team up

In what is one of the largest data center deals to date, Microsoft has agreed to pay Nebius $17.4 billion over the next five years for AI infrastructure. Speaking of the deal, Nebius CEO Arkady Volozh said that he expects more deals like it and that the agreement will "help us to accelerate the growth of our AI cloud business even further in 2026 and beyond."

This echoes comments from rival CoreWeave's CEO on CNBC, who said that AI companies "can not get enough compute" and that demand continued to be strong. The bullish news helped lift shares of companies across the market involved in AI data center building, including Applied Digital.

Image source: Getty Images.

Demand is hot, but risks remain

The opportunity in AI data centers is enormous, but the risks are too. Applied Digital is already carrying substantial debt and faces an unenviable choice to keep up with demand: Borrow more money at punishing interest rates or dilute existing shareholders.

There is a serious risk here that demand will cool and companies like Applied Digital will get left holding the bag. The risks are too great here, and I would stay away from Applied Digital stock -- as well as CoreWeave stock, for that matter.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Nebius Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.