What happened
Data center designer, developer, and operator Applied Digital (APLD +0.43%) saw its shares take off like a rocket Tuesday morning after announcing that its Sai Computing subsidiary has signed a $180 million, 24-month contract to support the work of a "major AI customer."
The customer's name was not disclosed. But including the words "million-dollar" and "artificial intelligence" in the press release seems to have had the intended effect: Today, Applied Digital's stock is off to the races -- up 48.2% through 11:45 a.m. ET.
NASDAQ: APLD
Key Data Points
So what
What Applied Digital did say is that the contract was for the company's recently launched AI Cloud Service, that it will entail a "significant pre-payment," and that Applied Digital will begin supporting the customer in June, with its service being "fully ramped up" by year-end.
CEO Wes Cummins also indicated that demand for the high-power computing services needed to support large language models for artificial intelligence services (such as ChatGPT or [Alphabet's] Google's Bard) is "unprecedented" and the company's first big AI contract is probably "just the tip of the iceberg" for Applied Digital.
Now what
Again, these are exactly the kinds of words calculated to attract investors excited about the prospects of winning stock-market riches from AI.
It probably doesn't hurt that Applied Digital, which generated total sales of only $8.5 million in its last fiscal year, is already putting money where its mouth is. The company has racked up sales of more than $33 million in just the first three quarters of its fiscal 2023.
What's more, analysts who follow the company are forecasting sales to quintuple next year, rocketing from an expected $57 million this year to nearly $279 million in sales in 2024 -- and an expected GAAP profit.
Today's contract announcement could go a long way toward making those projections a reality. And if Applied Digital succeeds in both posting monster sales growth next year and earning a profit on those sales, the sky could be the limit on how high this growth stock will fly.
