Why Applied Digital Stock Saw Big Pullbacks But Has Bounced Back Today

Applied Digital (NASDAQ: APLD) stock has seen another day of big volatility in Friday's trading. The company's share price was down 0.3% as of 3:15 p.m. ET amid the backdrop of a 0.1% pullback for the level of the S&P 500 and a 0.6% decline for the Nasdaq Composite. The stock bounced back after having been down as much as 9.9% earlier in trading.

While there doesn't appear to be any business-specific catalyst behind Applied Digital's valuation volatility, the stock is losing ground in conjunction with wavering confidence in the near-term outlook for artificial intelligence (AI) stocks and bearish macroeconomic indicators.

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Applied Digital stock sees big moves; bearish sentiment on AI valuations strengthens

Applied Digital stock is continuing to see substantial pricing swings as investors reposition in relation to strengthening sentiment that artificial intelligence (AI) stocks may be overvalued. Adding to the bearish trend, the University of Michigan published a new report on U.S. consumer confidence suggesting that positive outlooks on the economy had fallen to their lowest level since 2022. On the other hand, investors bought back into the stock later in the day's trading, significantly cutting its daily losses.

What comes next for Applied Digital?

With its last quarterly report, Applied Digital announced revenue of $64.2 million -- good for growth of 84% compared to the prior-year quarter. The company's net loss in the period also improved dramatically compared to last year's quarter. On the heels of recent contract announcements, there's a good chance that the business will continue to post strong sales expansion in the near term, but that doesn't necessarily mean that the stock is due for an imminent rebound.

Even with some recent pullbacks, Applied Digital's share price has surged 305% higher across 2025's trading as of this writing. If confidence in bullish momentum in the AI category continues to weaken, the stock could continue to see contraction for valuation multiples even in the face of strong sales growth and margin improvements.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.