Applied Digital Corp. (NASDAQ: APLD) experienced a significant pullback on Monday, with shares falling approximately 10% to $38.30 in midday trading. The stock, which had opened at $42.75 and reached an intraday low of $37.945, reversed course from a recent rally that was fueled by a major contract win and a corporate restructuring.
Profit-Taking and Market Headwinds
The decline was attributed to profit-taking after Applied Digital's stock had surged on the back of a $7.5 billion, 15-year lease agreement with a major U.S. cloud customer and the spin-off of its ChronoScale unit. Broader market conditions also weighed on the stock, as U.S. equities fell amid rising Treasury yields and higher oil prices. The 10-year Treasury yield climbed to 4.630%, while the Nasdaq led major indexes lower.
"Investors are looking at interest rates and oil and starting to question how much of an impact this is going to have," said Adam Turnquist, chief technical strategist at LPL Financial, in comments to Reuters.
Broader Selloff in AI Infrastructure Names
The selling pressure was not isolated to Applied Digital. Other mid-cap and industrial technology stocks, including Viasat, CECO Environmental, and HNI, also experienced declines. The broader risk-off sentiment was driven by concerns over higher oil prices and rising yields, which prompted investors to reassess the valuations of high-growth data-center stocks.
Applied Digital's Bull Case and Execution Focus
Despite the pullback, Applied Digital's long-term prospects remain tied to the massive scale of its AI infrastructure build-out. On April 23, the company announced a 15-year lease worth approximately $7.5 billion with an unnamed U.S.-based hyperscaler for 300 megawatts of capacity at its Delta Forge 1 campus. This deal brought Applied Digital's total contracted lease revenue to over $23 billion.
Chairman and CEO Wes Cummins emphasized the importance of execution, stating, "Our priority remains execution – bringing capacity online on schedule and operating it with discipline over the long term."
ChronoScale Spin-Off and Risk Separation
On May 5, Applied Digital completed the separation of its cloud business into ChronoScale, which began trading on Nasdaq under the ticker CHRN. Applied Digital retained about 97% of the new entity. Cummins noted that the data-center hosting platform benefits from long-duration contracts, while cloud compute operates on shorter cycles with a different risk profile.
Wall Street Analyst Optimism
Wall Street remains cautiously optimistic. Needham analyst John Todaro raised his price target on Applied Digital to $51 from $48 and maintained a Buy rating after hosting management at a technology conference. Todaro cited "increased confidence" in the company's ability to execute on 1 gigawatt under construction and secure additional hyperscaler leases.
Competitive Landscape and Financial Realities
Competitors also faced pressure, with CoreWeave falling about 7.5%, and larger data-center landlords Digital Realty and Equinix also declining. However, Applied Digital's drop was steeper, reflecting its higher risk profile. The company reported fiscal third-quarter revenue of $126.6 million, up 139% year-over-year, but its net loss attributable to common stockholders widened to $100.9 million. It ended the quarter with $2.1 billion in cash and equivalents and $2.7 billion in debt.
Risks and Timeline
Delta Forge 1 is not expected to begin initial operations until mid-2027, and Applied Digital anticipates securing up to $600 million in financing for development and working capital. If interest rates remain elevated, lenders become cautious, or construction faces delays, the contracted revenue could take longer to materialize as cash flow.
For now, the market is not rejecting Applied Digital's AI narrative but is questioning the appropriate valuation before the infrastructure is fully built and the long-term leases start generating steady earnings.
