Applied Digital <\/strong>(NASDAQ: APLD)<\/span> has turned into one of the market’s hottest growth stocks in recent years. After the data center operator pivoted from a focus on providing infrastructure for crypto miners to building infrastructure to support artificial intelligence (AI), its share price has absolutely exploded.<\/p>\n But while the AI-first strategy has created an enormous opportunity, the company is walking a fine line, and any slip-up could turn this growth stock into dead weight in your portfolio.<\/p>\n Will AI create the world’s first trillionaire?<\/strong>\u00a0Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need.\u00a0Continue \u00bb<\/strong><\/span><\/a><\/em><\/p>\n Applied Digital builds and operates data centers specifically designed for AI workloads<\/a>, and leases the facilities to tenants that actually run the servers that power AI. Think of it as a specialized real estate developer and landlord — it finds the land, builds the facilities, and keeps the lights on and the AC running.<\/p>\n Given the immense power requirements of AI and the complexity of the infrastructure that supports it, there are only a handful of companies capable of doing this at scale. That means Applied Digital is extremely well positioned to take advantage of AI’s rapid growth to expand its top line — and it has.<\/p>\n The company’s revenue has exploded from $55 million in 2023 to $264 million over its last four reported quarters. Applied Digital is in the midst of building an immense amount of capacity and now has commitments for up to $16 billion in revenue over the next 15 years.<\/p>\n While there is a lot of opportunity in this niche, there’s also a whole lot of risk. At present, the company is operating in the red, losing $125 million over the last 12 months. But that’s not necessarily a major concern at this point; there is a clear path to profitability in the coming years.<\/p>\n The real problems are twofold: the immense debt the company is taking on to fuel its growth and its heavy reliance on its largest customer.<\/p>\n Applied Digital had just over $42 million in debt on the books in Q1 2024. As of Nov. 30, the end of its last fiscal quarter, that figure has grown to nearly $2.6 billion. And this isn’t cheap debt; the bulk of it is financed at an interest rate of 9.25%.<\/p>\n More concerning to me, however, is Applied Digital’s reliance on CoreWeave<\/strong>. The neocloud operator<\/a> is responsible for the vast majority of Applied Digital’s future lease income. While customer concentration to that degree would be a concern for any business, it’s especially so when the key customer is itself unprofitable and relying on enormous amounts of debt to fuel its growth — even more debt than Applied Digital. If at some point, CoreWeave cannot make good on its payments, Applied Digital will be in a tough spot.<\/p>\n<\/p><\/div>\n Do I think Applied Digital actually will go to $0? Likely not, but it’s entirely possible — and the risk of a steep slide is too great for my comfort.<\/p>\n Before you buy stock in Applied Digital, consider this:<\/p>\n The Motley Fool Stock Advisor<\/em> analyst team just identified what they believe are the\u00a010 best stocks<\/a><\/strong> for investors to buy now\u2026 and Applied Digital wasn\u2019t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.<\/p>\n Consider when Netflix<\/strong> made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation,\u00a0you\u2019d have $443,299<\/strong>!* Or when Nvidia<\/strong> made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you\u2019d have $1,136,601<\/strong>!*<\/p>\n Now, it\u2019s worth noting\u00a0Stock Advisor\u2019s<\/em> total average return is 914% \u2014 a market-crushing outperformance compared to 195% for the S&P 500.\u00a0Don’t miss the latest top 10 list, available with\u00a0Stock Advisor<\/em>, and join an investing community built by individual investors for individual investors.<\/span><\/strong><\/span><\/p>\n See the 10 stocks \u00bb<\/strong><\/a><\/p>\n *Stock Advisor returns as of February 7, 2026. <\/em><\/p>\n Johnny Rice<\/a> 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<\/a>.<\/em><\/p>\n<\/div>\n<\/div>