Serious AI Investors Confident Amid ‘AI Bubble’ Debate: See Their Top Stock Choice

Concerns about a potential bubble in artificial intelligence (AI) stocks are surfacing among investors. While there are skeptics, many remain optimistic about the sector’s future. A recent survey revealed that 59% of participants believe a downturn in AI stocks is unlikely to significantly impact their finances.

Top Stock Choice Amid AI Bubble Debate

One company that has garnered significant investor interest is Applied Digital (NASDAQ: APLD). This firm specializes in data centers tailored for AI workloads, capturing the market’s attention as demand for AI applications surges. Recently, Applied Digital’s stock has climbed over 208% in the past year, while the S&P 500 has shown a more modest gain of 16.9% during the same period.

Looking at a broader timeframe, the stock’s growth over the last three years is remarkable, with a 1,430% increase. This explosive growth indicates strong market confidence in AI’s future and the necessary infrastructure to support its expanding needs.

Understanding the Demand for Data Centers

The rising utilization of AI tools, including chatbots, necessitates considerable processing power, which is where Applied Digital excels. The company creates high-performance computing (HPC) data centers that service hyperscalers, the large firms providing optimized cloud computing solutions for AI software.

• In August, Applied Digital completed a lease agreement with CoreWeave for its Polaris Forge 1 campus in North Dakota.
• This agreement provides 400 megawatts of data center infrastructure for CoreWeave’s AI and HPC initiatives.
• The total expected lease revenue from this contract could reach approximately $11 billion.

Moreover, Applied Digital recently announced a loan facility with Macquarie Group and expressed that it is in advanced-stage negotiations with another investment-grade hyperscaler for multiple campuses.

The Future of Applied Digital Stock

Despite the high demand for Applied Digital’s services, its stock trades at 35 times trailing sales. Investors should be aware that the company is currently unprofitable, presenting a risk for those looking to invest. However, its growth potential remains alluring.

Investors must weigh this information carefully. Although Applied Digital currently stands out as a favored choice for many, it was not included in The Motley Fool Stock Advisor’s latest list of the top 10 stocks to buy. Investors should consider the opportunities presented in that list, which has historically yielded impressive returns.

Conclusion

The dialogue surrounding an AI stock bubble is ongoing. As some investors seek stable choices, others are diving headfirst into high-growth opportunities like Applied Digital. Whether or not to invest in this stock requires careful consideration of its current unprofitability and the broader market context.