Applied Digital (NASDAQ: APLD) stock is posting big gains in Thursday's trading. The company's share price was up 14.5% as of 3:30 p.m. ET. Meanwhile, the S&P 500 was up 1.1%, and the Nasdaq Composite was up 2.1%.
Along with bullish momentum for the broader market today, Applied Digital's valuation is getting a boost thanks to bullish demand indicators for the artificial intelligence (AI) data center space. Microsoft and Meta Platforms released quarterly results and updated their forward guidance yesterday, and the new reports from the tech giants suggest that spending on AI hardware and processing will remain high.
Applied Digital surges on AI infrastructure spending outlook
With their respective quarterly reports yesterday, Microsoft and Meta Platforms helped quell concerns among investors that growth for AI might be losing steam. Some recent reports suggested that Microsoft and Amazon have canceled some data center leases and pulled back on infrastructure expansion plans, but the latest capital expenditure (capex) updates suggest that big spending to facilitate AI processing will continue.
With its first-quarter report, Meta delivered a big increase for its full-year capex forecast. The company now expects capex to come in between $64 billion and $72 billion -- up from its previous forecast for capex between $60 billion and $65 billion. Meanwhile, Microsoft reported capex of $16.75 billion in its current fiscal year's Q3 -- which wrapped March 31. The average analyst estimate had called for capex of $16.37 billion in the period.
What's next for Applied Digital?
Building out AI infrastructure is currently the biggest capex driver for Microsoft and Meta Platforms. The fact that both companies are continuing to invest heavily in AI hardware and processing capabilities is a positive indicator for Applied Digital and the broader data center space.
On the other hand, the quarterly results that Applied Digital published earlier this month suggest that modeling demand and performance for smaller players in the space comes with significant challenges. The data center specialist posted sales of $52.9 million last quarter, falling well short of the average analyst estimate's call for revenue of $63.4 million in the period. So while Microsoft and Meta's recent quarterly reports delivered positive indicators for Applied Digital, the overall demand picture remains complex.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
