What happened
Applied Digital (APLD 1.71%) stock continued its encouraging run on Thursday, gaining nearly 5% to keep its multiday price appreciation streak going. Bolstering sentiment on the niche tech company was a price target lift from an analyst tracking its stock.
So what
That raise was quite significant; Needham & Co.'s John Todaro cranked his fair-value estimation on Applied Digital stock nearly 55% higher. He now feels the shares are worth $8.50 apiece, well above his previous $5.50 price tag. In making the change, he maintained his buy recommendation on the stock.
Applied Digital has enjoyed a surge of attention in recent days. Earlier in the week, the tech company, which has traditionally concentrated on designing and running data centers, announced that it is plunging into the white-hot artificial intelligence (AI) business. It launched a set of AI cloud services, which are technically being offered via subsidiary Sai Computing.
It wasn't clear whether Todaro's revised assessment of Applied Digital stock was based in any part on this development. Regardless, pushing into AI -- a segment investors can hardly get enough of these days -- has inarguably brought Applied Digital a lot of attention. Therefore, a new look at the stock is warranted.
Now what
All that said, market participants should be very cautious here.
AI is indisputably world-changing technology, but this does not mean every company harnessing it will meet with glorious success. Many tech businesses are vying to make money from the technology, and more than a few are sure to stumble as they attempt to do so. The proof is in the pudding, as they say, so in many instances, it's wise to wait a bit for early indications of what a company is able to do with the opportunity.
