Should You Buy Applied Digital (APLD) Stock While It's Under $30?

It's a good question. Should you buy Applied Digital's (NASDAQ: APLD) stock while it's under $30 per share? (As I write this, it's right at $30, but like all stocks, it's likely to go up a bit and down a bit from day to day.)

There are some very solid reasons why you might want to be an Applied Digital shareholder, but also some reasons to hold off on that. Let's take a look.

Image source: Getty Images.

For starters, know that Applied Digital designs, builds, and even operates data centers "for artificial intelligence (AI), cloud, networking, and blockchain workloads." That alone will likely have you understanding how the stock has managed to average annual gains of 77% over the past decade. (That's in large part due to its 232% gain over the past year!)

Since AI is booming and requires data centers to do its processing, data centers have been spreading. Research from McKinsey & Company has projected that demand for data center capacity could more than triple worldwide by 2030. Applied Digital certainly seems to believe that, as it has been signing deals to build data centers -- including some $11 billion worth for CoreWeave (NASDAQ: CRWV) to provide hundreds of megawatts worth of data center capacity over 15 years.

The company's potential is exciting, but don't jump into it without researching the stock further. For one thing, it's not exactly cheap. Its price-to-sales ratio, for example, was around 5 in 2024, and now it's 38. So there's no margin of safety here.

The company has also been spending like crazy in order to meet current and expected demand, and this has resulted in years of losses instead of gains.

For me, despite the great growth potential, I'd rather wait and see how Applied Digital does in the coming year or two. I'd ideally want some gains instead of losses and/or a more down-to-earth valuation. If you still want to buy some shares, perhaps just start with a few.

Selena Maranjian 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.