Applied Digital: The AI Selloff May Have Created a 159% Opportunity in This Under-$30 Stock

Artificial intelligence (AI) has created no shortage of stock market winners over the past two years. Even though the market has again become cautious about large-scale AI capex spending, that doesn’t mean the long-term opportunities of AI have disappeared. In fact, market phases like these often create a disconnect between a company’s share price and the progress of its underlying business. 

Applied Digital (APLD), an AI infrastructure specialist, is a prime example. The company is expanding at an extraordinary pace, yet the stock has been whiplashing lately. APLD stock is down 26% in the past month, but, thanks to today's spike, is now back in the green by 13% year-to-date (YTD). The recent weakness appears to reflect a broader selloff in AI infrastructure stocks and risk-off market sentiment, rather than a deterioration in the company's financials, which remained robust in the most recent quarter.

Wall Street also sees a very different picture, with analysts anticipating this still just under-$30 AI stock to skyrocket 159% from current levels. Let’s find out why.

Applied Digital Has Had a “Transformational Year”

Valued at $6.7 billion, Applied Digital is a key infrastructure provider in the AI ecosystem. The company develops massive, GPU-ready data centers that hyperscalers lease to train and deploy AI models. Its long-term lease contracts with hyperscalers allow it to earn recurring rental revenue. Recently, Applied Digital reported what management described as a "transformational year." During fiscal 2026, Applied Digital signed leases covering five AI data center campuses, including three new campuses in the last four months. The total contracted long-term lease value has now increased to $36 billion, a staggering 125% increase from fiscal 2025. The company has already contracted 1.41 gigawatts of critical IT load across these campuses. Additionally, three recently announced Polaris Forge campuses alone account for roughly $20 billion in contracted lease revenue from a single hyperscale customer.

What investors might have overlooked is that these aren’t just speculative projects but predictable cash flows tied to long-term infrastructure contracts. While these reflect future revenue, investors might question Applied Digital’s present performance, which remains equally encouraging. Revenue surged a whopping 407% year-over-year (YoY) to $258.7 million in Q4, thanks to the rapid expansion of its high-performance computing (HPC) hosting business, which alone generated $203 million in revenue. That included $152.4 million from tenant fit-out services, $44.1 million in base rent, and $6.5 million from tenant recoveries.

Additionally, services revenue reached $208.2 million, with data center rental and other revenue accounting for $50.6 million. Meanwhile, adjusted net income stood at $0.04 per diluted share, compared to a loss of $0.03 per share in the year-ago quarter. For the full fiscal year, revenue increased 167% YoY to $611.3 million, while adjusted earnings stood at $0.11 per share, versus a loss of $0.06 in fiscal 2025. The most encouraging sign was that the company’s HPC rental business generated a remarkable 91%  net operating income (NOI) margin. This means the AI data centers are highly profitable once they are operational and leased to customers. However, this rapid growth also comes with a cost. Building multi-billion-dollar AI data centers requires significant capital. During and after Q4 ended, the company secured:

• $2.15 billion of senior secured notes to fund Polaris Forge 2
• $300 million bridge facility led by Goldman Sachs
• A revolving credit facility of up to $550 million
• $1.59 billion of senior secured notes to fund additional expansion at Polaris Forge 1

But Applied Digital is making sure to also reduce its borrowing costs. At the end of Q4, it had $4.2 billion in cash, $5 billion in debt, and roughly $1.7 billion in equity, providing it ample resources to continue funding expansion.

The Growth Drivers That Could Keep the Momentum Going

As AI infrastructure demand continues to surpass existing capacity, rental costs for AI-ready data centers have risen over the last six months. As a result, Applied Digital anticipates increased leasing prices on future projects. The company is currently marketing an additional 1.7 gigawatts of future capacity in many states while also negotiating expansion agreements with two existing investment-grade clients. These projects could add another 250 megawatts and more than $6 billion in additional contracted revenue before accounting for expected higher pricing.

Additionally, management believes access to reliable power is most important in AI infrastructure. Combined with North Dakota's abundant natural gas resources, cooler climate, and business-friendly environment, Applied Digital believes it has secured one of the most attractive locations for large-scale AI infrastructure in the U.S., which could become its competitive advantage. 

Investors Should Still Keep One Eye on the Risks

Finally, an aggressive expansion strategy requires billions of dollars in ongoing capital investment. Investors should keep an eye on how the company manages its debt levels. There is also customer concentration risk, as its contracted revenue comes from only a few large hyperscale customers. However, as hyperscalers continue pouring hundreds of billions of dollars into AI infrastructure, the opportunities for Applied Digital are enormous. The stock's rocky performance in 2026 in no way reflects its outstanding financials and long-term growth prospects. 

It comes as no surprise why Wall Street sees strong upside in APLD stock and rates it a consensus “Strong Buy.” The average target price of $72.54 implies the stock could climb by 159% over current levels. But the high price estimate of $99 implies an upside potential of 253% over the next 12 months. Of the 13 analysts covering the stock, 10 rate it a “Strong Buy,” one says it is a “Moderate Buy,” and two rate it a “Hold.”

Reaching the high target price of $99 is not so far-fetched if the company continues to grow at this rate. But the company should also continue to convince investors that its massive spending is yielding worthwhile results.