Applied Digital (APLD) plunged 17.5% with no company-specific news after gaining 200% year-to-date. Applied Digital designs and operates AI data centers.
Applied Digital issued $2.35B in 9.25% senior secured notes to fund expansion and refinance debt. The company relies heavily on CoreWeave as its main tenant.
Hyperscalers issued $121B in bonds in Q3 2025 for AI infrastructure. This is over four times the prior five-year annual average.
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Applied Digital (NASDAQ:APLD) has been one of the standout performers in 2025, delivering gains of approximately 200% year-to-date. The company designs, builds, and operates next-generation data centers optimized for high-performance computing and AI workloads. Its strong performance positioned it as a key holding in Nvidia‘s (NASDAQ:NVDA) “secret” investment portfolio focused on AI ecosystem companies.
While most holdings in that portfolio declined sharply — resulting in an overall 30% drop in value since the end of Q3 2025 — Applied Digital was the outlier, with Nvidia’s stake rising 208% in total value to over $239 million in early December. This resilience helped shield the portfolio from even steeper losses during a broader AI infrastructure pullback.
However, that changed yesterday when Applied Digital shares plunged 17.5%, closing below $23 per share, with no apparent company-specific news triggering the decline.
Applied Digital’s rapid expansion into AI-focused data centers has required substantial financing. In its fiscal first quarter, the company reported $687 million in current and long-term debt alongside $74 million in cash and equivalents, but in November 2025, a subsidiary priced a $2.35 billion offering of 9.25% senior secured notes due 2030 to fund new facilities and refinance existing obligations. The debt is seen as riskier because Applied Digital relies heavily upon CoreWeave (NASDAQ:CRWV) as its main tenant.
Investors are growing uncomfortable with this rising level of leverage, particularly for a company still reporting net losses despite revenue growth. Analysts note that Applied Digital’s model relies on flawless execution of long-term leases — such as multi-billion-dollar contracts for its Polaris Forge campuses — to service debt and achieve profitability. Delays in power delivery, tenant ramp-ups, or shifts in hyperscaler demand could strain cash flows.
These concerns are not isolated to Applied Digital. Peers in the AI data center space, including IREN (NASDAQ:IREN), Nebius Group (NASDAQ:NBIS), and Cipher Mining (NASDAQ:CIFR), are experiencing sharp sell-offs beginning in November following reports of heavy borrowing to fund buildouts, with some describing the trend as a potential “debt bomb” for capital-intensive players.
Major technology companies are also increasing debt to support massive AI infrastructure spending. As of the third quarter, hyperscalers including Google, Meta Platforms (NASDAQ:META), Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Oracle (NASDAQ:ORCL) issued a combined $121 billion in bonds — more than four times the annual average of the prior five years. Meta alone raised funds tied to billions in data center projects, while overall sector capex forecasts point to hundreds of billions annually.
Although these firms generate strong cash flows, the shift toward debt financing has raised questions about whether AI growth can sustain such outlays long-term. Economists and credit analysts warn that rapid bond issuance echoes past tech cycles and could amplify risks if monetization lags or demand softens.
Debt concerns for Applied Digital have circulated for months, tied to its financing announcements and sector-wide leverage trends. Yesterday’s drop is a sign that momentum is unwinding during a broader pullback in AI infrastructure valuations, likely reflecting a number of factors including profit-taking after 2025’s explosive rally, heightened scrutiny of capital-intensive models in an elevated interest cost environment, and a market rotation toward defensive sectors as investors seek to limit downside risk.
Applied Digital is not alone; similar sentiment shifts have pressured other AI infrastructure names. As worries mount over the pace and profitability of the AI buildout, investors appear to be re-rating high-leverage growth stories, favoring companies with clearer paths to sustainable returns. This could signal the start of a broader sector decline in stock valuations if execution risks become prominent.
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