AI Data Center Stock May Not Be Down for Long

The shares of AI data center giant Applied Digital Corp (NASDAQ:APLD) are down 8.3% to trade at $28.91 at last check, a dismal outlook from semiconductor giant Qualcomm (QCOM) and increased AI spending at Alphabet (GOOGL) spooking traders.

APLD yesterday marked its worst day in roughly a year, extending a pullback from a Jan. 28, record peak of $42.27. This recent bear gap has placed the security within striking distance of a historically bullish trendline, though, making now an ideal time to buy the dip.

Per Schaeffer's Senior Quantitative Analyst Rocky White, Applied Digital stock is within 0.75 of the 100-day moving average's 20-day average true range (ATR), after remaining above it 80% of the time in the past two weeks and 80% of the last 42 trading sessions.

This signal has occurred four other times in the past 10 years, after which the stock was higher one month later 75% of the time, with an average 15.8% gain. From its current perch, a move of similar magnitude would put APLD back above $33 and pad its 252% year-over-year gain.

An unwinding of pessimism among options traders could also help the stock. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio ranks higher than 94% of readings from the past year, meaning options traders have been much more bearish than usual over the last two weeks.

The stock looks ripe for a short squeeze, too, with short interest up 13.1% in the most recent reporting period. The 86.25 million shares sold short now makes up 36.7% of the stock's available float.

What's more, APLD's Schaeffer's Volatility Scorecard (SVS) comes in at 82 out of 100. This means the shares have consistently realized higher volatility than the options have priced in.