%AppliedDigital (NASDAQ: $APLD) is a small-cap stock operating in a potentially huge industry.
Originally a cryptocurrency mining firm, Applied Digital has evolved to become a player in the %ArtificialIntelligence (AI) infrastructure boom.
Today, the Dallas, Texas-based company operates data centres that provide high-performance computing infrastructure for both AI and blockchain applications.
It’s a hot industry and many investors like that Applied Digital provides them with exposure to both data centres that run AI and blockchain networks on which crypto is built.
This helps to explain why APLD stock has risen 113% over the last 12 months and a massive 4,375% in the past five years.
While most investors would jump at a chance to earn those kinds of returns, Applied Digital is not without risks.
With a market capitalization of only $1.20 billion U.S., the company is a small-cap stock and prone to volatility.
At $4.84 U.S. per share, Applied Digital is also a penny stock defined as any security that trades for less than $5 U.S.
While the long-term gains have been impressive, APLD stock is down 31% in 2025.
The company’s share price is down another 10% on April 15 after reporting mixed financial results for this year’s first quarter.
Applied Materials, which is not yet profitable, posted an earnings per share (EPS) loss of -$0.08 U.S., which was better than a loss of -$0.10 U.S. that was the consensus forecast of analysts.
Revenue in the quarter totaled $52.92 million U.S., up 22% from a year earlier. However, the sales figure missed Wall Street’s estimate of $64.48 million U.S., sending the stock lower.
Perhaps worst of all, Applied Digital reported that its cash position deteriorated considerably in the most recent quarter.
Applied Digital reported negative free cash flow (FCF) of -$251.6 million U.S., which was much worse than -$2.33 million a year ago.
The negative cash position clearly has investors concerned judging by the post-earnings selloff in the stock.
While Applied Digital clearly has potential in the red-hot AI infrastructure space, it is a risky bet given its lack of profitability and heavy cash spend.
As such, investors may want to proceed with caution regarding APLD stock.
