Should You Buy Applied Digital (APLD) Stock Right Now?
Key Points
Applied Digital is in a fast-growing field, supporting data centers.
It could be worth buying if you plan to hang on to it for many years.
- 10 stocks we like better than Applied Digital ›
With Applied Digital's (NASDAQ: APLD) stock having surged 326% so far this year as of market close Oct. 21, does it make sense to invest in it now? I think the answer can be yes for some of us -- but not for all.
After all, each of us is in a different situation, with different investing horizons and risk tolerances. And the stock doesn't exactly look cheap. Its price-to-sales ratio was around 5 in 2024, and now it's 45.
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What Applied Digital does will explain why its stock has seen such demand from investors, driving up its share price. It's in the business of designing, building, and even operating data centers "for artificial intelligence, cloud, networking, and blockchain workloads." Between AI, cloud computing, and other technologies, data centers are booming. Research from McKinsey suggests that demand for data center capacity could more than triple worldwide by 2030.
Image source: Getty Images.
That's not just theoretical, either. Applied Digital has been inking deals to build data centers, including some $11 billion worth for CoreWeave to provide hundreds of megawatts worth of data center capacity over 15 years.
Considering that Applied Digital's market value was recently about $9 billion, you might ask yourself whether you see that value being higher in five or 10 years. If so, then buying seemingly costly shares now may prove to be a smart move. Do note, though, that the company isn't profitable yet, and it does carry a lot of debt. So weigh the pros and cons.
It's reasonable to pass on the stock now, if you're not comfortable with it due to its price or some other reason, but you might still add it to your watch list, as I have, hoping for a pullback.
Should you invest $1,000 in Applied Digital right now?
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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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