Johnny Rice, The Motley Fool Fri, November 13, 2026 at 9:40 AM EST 5 min read APLD -9.39% ^GSPC -0.97% ^IXIC -1.70% Trade APLD on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Applied Digital (NASDAQ:APLD) shares have lost about 30% since 2026 began, even as the S&P 500 (SNPINDEX:^GSPC) gained 12%, and the Nasdaq Composite (NASDAQINDEX:^IXIC) added 10%. Still, it's up by about 250% over the last three years -- not bad. While the company had its beginnings in the crypto mining space, it found massive success after a pivot to running data centers for artificial intelligence (AI), and now has $36 billion in revenue lined up if it can deliver on its promises.
But most of the data center capacity it has leased out is still under construction; there's no guarantee that it will come online on time and on budget. Here's why I think 2027 will see Applied Digital stock trading lower than it is today.
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You can think of Applied Digital as a sort of specialized developer and landlord. The company finds land, secures access to enough power, builds a data center, and then rents it out to a tenant. It doesn't actually fill the data center with the GPUs that power AI. That's the tenant's responsibility.
AI facilities are not your average data centers, and there are really only so many companies capable of bringing everything they require together at scale. That puts Applied Digital in a good spot to take advantage of the AI boom, and it has. Sales have grown from $55 million in 2023 to $611 million in 2026.
In its most recent quarter, the company more than quadrupled its top-line year over year to $342 million. About $184 million came from getting space ready for tenants, while $66 million was base rent.
As of its October earnings call, Applied Digital still needed to line up financing for three campuses that, together, represent more than $20 billion of the $36 billion it has under contract -- all with the same investment-grade tenant.
That should help the company secure better terms for that debt, but Applied's credit risk is still a concern, especially as it works to bring its facilities online prior to the cash flowing in meaningfully. At the moment, the company is spending considerably more on interest alone -- $77.4 million last quarter -- than it is collecting in base rent -- $66 million.
Applied Digital's debt has already climbed from $2.6 billion in November 2025 to $6.4 billion at the end of August 2026. To be fair, it borrowed at 7% for its latest building for one of its main tenants, CoreWeave (NASDAQ:CRWV), and that was down from the 9.25% it was forced to offer previously. But that's project-level financing and is secured by the property itself. Applied has also been forced to, in part, raise money through offering preferred equity -- a type of stock that pays a fixed dividend -- carrying an expensive 12.75% rate.
The borrowing landscape doesn't look great at the moment, and given what is happening around the industry for other companies in similar positions, the terms it may have to take on its future financing could be pretty unfavorable.
Applied has done a great job so far of delivering the infrastructure it promised on time; however, that doesn't mean it will continue to do so. Over the next year, it's trying to bring more than twice as much capacity online across its campuses as it did over the past year. Delays would push back the point at which it can start collecting rents on those facilities while interest keeps accruing and construction bills keep coming.
If Applied Digital lands financing at terms that are more favorable than the market expects, I think the stock will recover. But I don't think that will happen. I think the company will be forced to be creative and lean on funding options that hurt shareholders, such as dilutive stock sales, and that its share price will continue to slide through 2027.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Prediction: This Data Center Stock Will Keep Sliding in 2027 was originally published by The Motley Fool
