Should You Buy Applied Digital Stock Right Now? An In-Depth Look
February 8, 2026 — by Johnny Rice, The Motley Fool
With the unstoppable growth in artificial intelligence (AI) and cloud computing, the demand for data centers is surging. A recent McKinsey report projects investments in AI data centers could skyrocket to as much as $7 trillion by 2030, underscoring the significant opportunities in this sector. Applied Digital (NASDAQ: APLD), a company specializing in building large-scale data center infrastructure, aims to capitalize on this boom. But is it a good time to buy its stock?
A Closer Look at Applied Digital’s Financial Health
Applied Digital has been aggressively pursuing growth to ride the wave of AI infrastructure demand. However, this growth has been fueled predominantly by debt, raising red flags for cautious investors.
In the first quarter of 2024, Applied Digital’s total debt stood at roughly $44 million. Fast forward to today, and that figure has ballooned to a staggering $2.6 billion. This rapid escalation has pushed the company’s debt-to-equity ratio beyond 125%, a level that indicates a highly leveraged balance sheet.
While borrowing to fuel expansion is a common strategy in capital-intensive industries like data centers, this level of indebtedness exposes Applied Digital to significant financial risk. If the company’s projects do not generate expected revenues swiftly, the burden of debt servicing could become overwhelming.
Relying Heavily on a Single Customer: A Risk Factor
Another notable risk for Applied Digital is its heavy dependence on just two customers for future lease revenue, totaling an expected $16 billion. Out of this, $11 billion is tied to CoreWeave, a high-growth player with its own aggressive debt-driven expansion plans.
This customer concentration presents a double-edged sword. On one hand, securing large, long-term contracts provides revenue visibility. On the other, should CoreWeave face financial hurdles and fail to honor its obligations, Applied Digital could experience catastrophic revenue shortfalls. This reliance makes Applied Digital’s future earnings more vulnerable to the financial health and strategic decisions of a handful of clients.
The Pressure to Deliver On Time
Applied Digital’s contracts give their customers the option to walk away from lease agreements without penalty if Applied Digital fails to meet construction deadlines. Considering the complexity and scale of the data centers involved, delays are a realistic possibility.
Construction setbacks could jeopardize revenue projections and damage relationships with key clients. The stakes are high, and any significant delays could erode investor confidence and the company’s financial standing.
Should Investors Buy Applied Digital Now?
Despite the promising backdrop of soaring data center investments driven by AI, Applied Digital’s current financial profile raises concerns. The company’s enormous debt load combined with customer concentration risk and construction execution challenges paint a cautious picture.
The Motley Fool’s Stock Advisor team recently released a list of the 10 best stocks to consider now—and Applied Digital was not among them. Instead, they highlight other companies with strong fundamentals and growth prospects that could potentially deliver superior returns.
For perspective, those who invested early in tech giants like Netflix in 2004 or Nvidia in 2005, following Stock Advisor recommendations, have seen exponential gains. The service’s total average return currently outperforms the S&P 500 by a wide margin, offering investors a compelling alternative approach to stock selection.
Final Thoughts
If you’re considering investing in Applied Digital, weigh the significant risks of its debt levels, reliance on a limited number of customers, and the possibility of project delays. While the upside could be substantial if everything proceeds perfectly, the potential downsides might outweigh the benefits for many investors.
For those seeking growth opportunities in the AI infrastructure space, diversifying across more established companies or those with solid financial health may be a more prudent strategy.
Disclosure: The author has no position in Applied Digital or any stock mentioned. The Motley Fool has no position in the stocks discussed.
For more in-depth stock analyses and investment insights, visit The Motley Fool at Fool.com.