Nvidia is Buying This Data Center Stock Under $10, Should You?

Applied Digital (APLD), a small-cap data center specialist based out of Dallas, is in focus today after artificial intelligence (AI) semiconductor giant Nvidia (NVDA) disclosed a roughly 3% stake in the company in its latest regulatory filing. APLD is up 1.7% this afternoon, pulling back from earlier gains on a down day for stocks.

Nvidia's strategic investment in Applied Digital, totaling 7.72 million shares valued at about $63.66 million, underscores its commitment to the AI infrastructure sector. This move aligns with Nvidia's broader strategy to integrate its advanced chips into the AI ecosystem, enhancing its influence in the industry's growth. 

Applied Digital, recognized as a "Preferred Cloud Partner" by Nvidia, specializes in next-generation data centers and cloud solutions for high-performance computing. Despite not yet achieving profitability, Applied Digital has demonstrated substantial revenue growth, with a 67% year-over-year increase in its fiscal first quarter. The company is expanding its data center capacity, positioning itself well for future demand in AI and blockchain applications. 

While Applied Digital shares are only slightly higher today after the 13F filing, APLD stock previously surged 65% on Sept. 5 when news first broke that Nvidia was among the major backers of a $160 million funding round. 

Analysts have set an average price target of $10.71 for APLD, suggesting the stock could rise another 53% from here.