Shares of Applied Digital (APLD 5.88%) are soaring on Thursday, up 6.7% as of 1:10 p.m. ET. The jump comes as the S&P 500 and the Nasdaq Composite were little changed.
The stock of the artificial intelligence (AI) data center company is getting a boost from comments from Microsoft's chief technical officer (CTO) at a conference this week. The CTO, Kevin Scott, made clear that even after all of the data center building in the last few years, there is still a significant gulf left between what companies like his want and what is available.
Demand is still red hot for AI data centers
Just a month after inking a major deal with CoreWeave that will use its primary data center's full capacity, investors were encouraged by Scott's comments that the industry can't get enough AI computing capacity and that calling it a "massive crunch is probably an understatement."
Image source: Getty Images.
The opportunity for Applied Digital and other AI data center builders is enormous, but so are the risks. The company already carries a significant debt load and will have to borrow more at high rates or dilute its shareholders through stock sales. If AI demand lags, things could turn south.
The risks are too great here, and I would stay away from Applied Digital stock -- and CoreWeave stock as well, for that matter.
