Why Is Applied Digital Stock Soaring Today?

Key Points

• The chief technology officer of Microsoft said his company and the industry at large can't get enough computing capacity to satisfy demand.

• In recent months, Applied Digital has inked some huge deals on the strength of this demand.

• 10 stocks we like better than Applied Digital ›

Shares of Applied Digital (NASDAQ: APLD) are soaring on Thursday, up 6.7% as of 1:10 p.m. ET. The jump comes as the S&P 500 and the Nasdaq Composite were little changed.

The stock of the artificial intelligence (AI) data center company is getting a boost from comments from Microsoft's chief technical officer (CTO) at a conference this week. The CTO, Kevin Scott, made clear that even after all of the data center building in the last few years, there is still a significant gulf left between what companies like his want and what is available.

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Demand is still red hot for AI data centers

Just a month after inking a major deal with CoreWeave that will use its primary data center's full capacity, investors were encouraged by Scott's comments that the industry can't get enough AI computing capacity and that calling it a "massive crunch is probably an understatement."

Image source: Getty Images.

The opportunity for Applied Digital and other AI data center builders is enormous, but so are the risks. The company already carries a significant debt load and will have to borrow more at high rates or dilute its shareholders through stock sales. If AI demand lags, things could turn south.

The risks are too great here, and I would stay away from Applied Digital stock -- and CoreWeave stock as well, 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 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.