Applied Digital (APLD) is back in focus after a run of large announcements, including a US$7.5b hyperscaler AI infrastructure deal and new US$300m bridge financing for its third AI data center.

The share price has reacted strongly to this stream of announcements, with a 1-day share price return of 8.1%, a 7-day return of 25.2% and a 30-day move of 69.8%. The 1-year total shareholder return is a very large figure that points to powerful momentum.

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With Applied Digital now carrying contracted revenues in the tens of billions and trading about 18% below analyst price targets, the real question is simple: is this still early in the story, or is the market already pricing in future growth?

Most Popular Narrative: 11% Undervalued

Applied Digital's most followed narrative pegs fair value at about $50, sitting above the last close of $44.59, which puts the current rally into clearer context.

The company has recently secured long-term (15-year) leasing agreements with CoreWeave, a major AI hyperscaler, for its purpose-built AI/HPC data center campus, Polaris Forge 1, representing a total of $7 billion in contracted revenue and a multi-year, recurring, and predictable revenue stream that directly supports future revenue growth and cash flow stability.

Curious what justifies that higher fair value tag? The narrative leans on rapid top line expansion, a shift from losses toward margin improvement, and a future earnings multiple that assumes Applied Digital can earn its place alongside larger IT peers.

Result: Fair Value of $50.09 (UNDERVALUED)

However, there is still meaningful execution risk, with heavy debt funding and reliance on a handful of large hyperscaler and crypto clients that could quickly shift sentiment.

Another View: Rich Multiples Point To A High Bar

The fair value narrative suggests Applied Digital is about 11% undervalued around $50 per share, but the current P/S ratio of 39.9x paints a very different picture. That compares with 2x for the wider US IT industry, 8.7x for peers, and a fair ratio of 21.3x.

In plain terms, the stock is priced far above both sector norms and the level the fair ratio suggests the market could move toward. This raises the risk that even small disappointments in growth, margins, or contract execution may affect the share price significantly. The key question is whether you think the business can keep justifying that kind of premium multiple over time.

Next Steps

Mixed signals so far, with strong momentum and rich multiples offset by real execution questions. It makes sense to review both sides quickly and decide where you stand after weighing the 1 key reward and 4 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.