Why Applied Digital Stock Jumped 8.6% Today
Key Points
Applied Digital has secured a loan facility with Macquarie Group to fund the early development of new data center campuses.
Thursday's softer-than-expected inflation reading boosted shares, as potential Federal Reserve rate cuts could reduce the company's borrowing costs.
Shares of Applied Digital (NASDAQ: APLD) jumped on Thursday, finishing the day up 8.6%. The spike came as the S&P 500 and the Nasdaq Composite finished up 0.7% and 1.3%, respectively.
The artificial intelligence (AI) data center company announced today that it secured $100 million in financing to "fund the pre-lease development costs for new data center projects."
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Applied Digital secures $100 million
In a press release on Thursday, the company said that it has entered into a loan facility with its previous financing partner, Macquarie Group, to fund the initial planning, permitting, and early construction of several new data center campuses it is building for an as-yet-unnamed "investment-grade hyperscaler."
Cooler inflation data lifts rate-sensitive stocks
Shares were also lifted by today's inflation report, revealing that prices in November rose less than anticipated. The data makes it more likely that the Federal Reserve will cut interest rates further, a move that could help Applied Digital lower its borrowing costs.
Image source: Getty Images.
Applied Digital still carries a significant risk
Regardless, the company will continue to have to take on expensive debt or dilute shareholders through stock sales -- or, more likely, both. And there are huge risks in the data center market; a downshift in demand for AI could leave companies like Applied Digital unable to pay its debts. I would not own Applied Digital.
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.