Why Applied Digital Stock Fell Today
Key Points
President Trump's threats over Greenland triggered a sell-off across the market.
Applied Digital's debt-heavy business model makes it especially vulnerable to potential economic slowdowns.
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Shares of Applied Digital (NASDAQ: APLD) fell on Tuesday, finishing the day down 5.2%. The drop comes as the S&P 500 and the Nasdaq Composite both had their worst day in months, losing 2.1% and 2.4%, respectively.
The artificial intelligence (AI) data center company's stock was caught up in a major market sell-off as investors reacted to President Trump's continued attempts to acquire Greenland.
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President Trump refuses to back off Greenland
President Trump has continued to demand U.S. control of Greenland, an independent territory of Denmark. The President has threatened to impose increased tariffs on seven European Union (E.U.) members and the United Kingdom (U.K.) if they continue to block a U.S. takeover, and today, when asked how far he would be willing to go to secure control, the President answered, "You'll find out."
Image source: Getty Images.
Applied Digital is walking a tightrope
The threat of another trade war sent stocks lower, especially more speculative tech stocks like Applied Digital. Although the company wouldn't be directly affected by European tariffs, a broader economic slowdown could undermine its rapid growth. Given Applied Digital's reliance on expensive debt, it can't afford a decline in demand. This is the reality of Applied Digital and other data center operators: their premium valuations and heavy debt loads make their stocks especially volatile.
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Johnny Rice 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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