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Is Applied Digital an Excellent AI Stock to Buy Right Now? | APLD STock Analysis

Parkev Tatevosian, CFA•Aug 20, 2026

Summary

Parkev provides an updated analysis of Applied Digital, shifting from a cautious stance in June to a bullish outlook following a nearly 50% drop in share price. Parkev highlights the company's explosive revenue growth, which increased by 400% in the most recent quarter, and points to a massive $36 billion total contracted value for long-term leases. Parkev explains that the business model relies on securing contracts with major hyperscalers to obtain favorable financing rates from lenders for capital-intensive data center projects.

Parkev notes that while profit margins are currently negative at -30%, they are trending upward as the company scales. Parkev also emphasizes the dramatic improvement in returns on invested capital, which rose from -120% in 2020 to -4.6% recently. Using a discounted cash flow model, Parkev calculates an intrinsic value of over $42 per share, suggesting a 48% upside from current levels over the next 12 to 18 months. Parkev acknowledges risks such as potential data center overcapacity and the uncertainty of contract renewals after their initial 3-to-10-year terms.

Applied Digital: Parkev upgrades the stock to a buy due to its significant price drop and strong fundamental growth in the data center sector. Parkev points out that the forward price-to-sales ratio of 4.3 is near historical lows, offering a margin of safety. Parkev estimates the fair value of the stock to be over $42, providing significant potential upside for investors.
Nvidia: Parkev mentions that Nvidia's upcoming quarterly results on August 26th will be a critical catalyst for understanding broader industry dynamics. Parkev plans to provide live coverage of these earnings to assess how they impact the demand for data center infrastructure. Parkev suggests that Nvidia's performance will clarify whether the current boom in AI infrastructure spending is sustainable.
Microsoft, Amazon, Alphabet, and Meta: Parkev identifies these hyperscalers as the core customer base that provides Applied Digital with financial leverage. Parkev explains that deals with these high-credit companies allow Applied Digital to negotiate better interest rates with lenders. Parkev warns that the long-term success of Applied Digital depends on whether these specific firms choose to renew their contracts or move operations in-house.

Mentioned Stocks

APLD
Sentiment: BUYAction: RECOMMENDED

Reasoning: Parkev calculates an intrinsic value of over $42 per share, representing approximately 48% upside from the current price of $28.55. Parkev highlights the $36 billion contracted backlog and the fact that the forward price-to-sales ratio of 4.3 is near its historical low. Despite current negative margins, Parkev believes the improving returns on invested capital and the massive demand from hyperscalers justify a buy rating at these levels.

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