What happened
Shares of Applied Digital (APLD +2.62%) saw big sell-offs in Thursday's trading. The data-center services stock closed out the daily session down 12%, according to data from S&P Global Market Intelligence. The S&P 500 and Nasdaq Composite indexes ended the day down 1.4% and 1.9%, respectively.
The market saw an uptick in bearish momentum today following the publication of Nvidia's second-quarter earnings report, and Applied Digital participated in the pullback. Interestingly, Nvidia actually reported fantastic Q2 results.
NASDAQ: APLD
Key Data Points
So what
Following Nvidia's fantastic second-quarter release, investors are worried that the big bull run for artificial intelligence (AI) stocks may have run its course.
The graphics-processing-unit (GPU) leader crushed earnings expectations for the period, reporting earnings per share of $2.70 on sales of $13.51 billion. For comparison, the average analyst estimate had guided for per-share earnings of $2.09 and revenue of $11.22 billion. Nvidia also guided for roughly $16 billion in revenue in the current quarter, far ahead of the average analyst estimate's call for sales of $12.61 in the period.
But despite the excellent Q2 results and guidance, Nvidia stock ended the day up just 0.5%. Given the magnitude of its sales, earnings, and guidance beats, the weak gains in Thursday's session are sending a worrying signal.
Applied Digital and many other stocks that have seen big gains this year thanks to excitement surrounding AI saw outsized sell-offs as the market reassessed valuations for artificial intelligence companies. The data-center company had recently gotten a boost after receiving "elite partner" status within the Nvidia Partner Network, and shareholders may have been particularly skittish after the GPU leader's results didn't translate into big share price gains.
Now what
Despite today's big pullback for the stock, Applied Digital has rallied roughly 225% year to date. The impressive run has been driven by strong sales growth and optimism about the company's opportunities to provide data-center services for artificial intelligence and other high-performance computing applications.
After such big gains, it's possible that Applied Digital will continue to see substantial valuation pullbacks if investors broadly become more cautious about AI stocks. The market's tepid response to Nvidia's blockbuster Q2 results and guidance seem to signal that investor excitement surrounding AI is cooling off -- at least temporarily.
