Why Applied Digital Stock Is Skyrocketing Today

Applied Digital (NASDAQ: APLD) stock is surging higher in Friday's trading. The data center company's share price was up 13.6% as of 10:30 a.m. ET against the backdrop of a 0.6% decline for the S&P 500 index and a 0.7% pullback for the Nasdaq Composite index.

Applied Digital is posting big gains today following comments made by Nvidia CEO Jensen Huang. In a prerecorded interview, Huang said that investors had gotten the wrong conclusions about the DeepSeek artificial intelligence (AI) model that shook up the market last month.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Applied Digital stock jumps after Huang's comments bode well for data centers

The DeepSeek R-1 model caused massive sell-offs for Nvidia and other AI stocks last month because investors believed the software proved that powerful artificial intelligence (AI) software could be built and run with far less powerful hardware than previously anticipated. Applied Digital is a data center specialist focused on providing computing services for AI applications, so this had big implications for the company.

But Nvidia has now recovered most of the valuation losses it saw shortly after DeepSeek's R-1 debut, and the AI leader's CEO has addressed the situation. Huang says that there will be strong demand for Nvidia's chips and AI processing power even as AI training becomes more efficient.

What's next for Applied Digital?

Applied Digital is one of only a handful of companies that Nvidia directly invests in, and it should continue to benefit from rising demand for data center processing. The company is investing to expand its data center footprint, and it's already seeing some strong sales growth. Revenue rose 51% year over year to reach $63.9 million in the second quarter of its 2025 fiscal year, which ended Nov. 30.

With today's gains, Applied Digital is now valued at roughly $2.6 billion and is trading at approximately 10 times this year's expected sales. While the company is trading at a growth-dependent valuation, it's likely that the business will continue posting very strong sales momentum -- and it has a massive runway for long-term expansion.

Should you invest $1,000 in Applied Digital right now?

Before you buy stock in Applied Digital, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Applied Digital wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $858,668!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

Learn more »

*Stock Advisor returns as of February 7, 2025

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