Can Applied Digital Stock Double Again in 2026? Valuation Risks vs. AI Infrastructure Growth Potential

The question of whether Applied Digital (NASDAQ: APLD) can double in value again in 2026 hinges on a delicate balance between its explosive growth in AI infrastructure and the risks embedded in its stretched valuation. As the AI revolution accelerates, Applied Digital has positioned itself as a critical enabler of hyperscalers, securing long-term contracts that promise recurring revenue and capacity expansion. However, . This analysis evaluates the interplay between Applied Digital's growth trajectory and valuation risks, drawing on recent financial results, industry trends, and peer comparisons.

Growth Potential: A Strategic Bet on AI Infrastructure

Applied Digital's business model is built on the "" analogy for the AI era. By leasing data center capacity to hyperscalers, the company benefits from the explosive demand for compute power without bearing the full operational risks of managing AI workloads. Its recent contracts underscore this strategy. A 15-year, $11 billion agreement with CoreWeave covers 400 megawatts of critical IT load at the Polaris Forge 1 campus, while a $5 billion lease for 200 megawatts at Polaris Forge 2 with an investment-grade U.S. hyperscaler brings total leased capacity to 600 megawatts across two campuses according to Q1 2026 results. These agreements, combined with a first right of refusal for an additional 800 megawatts, create a defensible revenue stream that aligns with the projected $350 billion in hyperscaler AI investments for 2026 as reported in Q1 2026 results.

Financial results reinforce this optimism. In Q1 2026, Applied Digital , driven by these contracts and AI infrastructure development. as detailed in Q1 2026 results. Analysts project revenue growth of 38% in 2026 and 85% in 2027, reflecting confidence in its pipeline of 4 gigawatts of capacity according to analyst forecasts.

Valuation Risks: A Premium That May Not Justify Margins

Despite these positives, Applied Digital's valuation remains a point of contention. according to stock data, , as reported in Q4 2025. This premium is not fully supported by its current margins, as noted in financial analysis. While the company's long-term leases provide visibility, its reliance on hyperscalers exposes it to risks such as contract renegotiations, technological obsolescence, and capital intensity.

The capital-intensive nature of data center development also raises questions about scalability. Unlike software companies that achieve high margins through recurring revenue with minimal incremental costs, Applied Digital must continuously invest in infrastructure to meet demand. This dynamic is evident in its recent financing activities, which highlight the need for external capital to fund expansion as detailed in Q1 2026 results. Additionally, the lumpiness of technical fit-out revenue and the timing of high-performance computing agreements could lead to near-term volatility in earnings as noted in analyst reports.

Industry Context: A Sector in Hypergrowth, but With Divergent Valuation Multiples

To contextualize Applied Digital's valuation, it is instructive to compare it with peers in the AI infrastructure sector. For example, , as detailed in earnings analysis. , according to earnings data. These companies, however, operate at different stages of the AI stack and enjoy higher margins due to their software-centric models.

In terms of valuation multiples, , as reported in industry analysis. , suggesting the market is pricing in outsized growth expectations. While this could be justified if the company maintains its first-mover advantage and executes on its 4 gigawatt pipeline, it also leaves less room for error. A slowdown in hyperscaler demand or delays in project timelines could lead to a re-rating.

Conclusion: A High-Risk, High-Reward Proposition

Applied Digital's strategic positioning in the AI infrastructure boom is undeniably compelling. Its long-term leases with hyperscalers and execution on expansion projects position it to capture a significant share of the $350 billion AI investment pipeline in 2026. However, the stock's current valuation reflects a level of optimism that may not be fully supported by its margins or capital structure. For investors, the key question is whether the company can sustain its growth trajectory while improving profitability. If it can, the stock could indeed double again in 2026. If not, the premium embedded in its valuation may prove unsustainable.

In the end, Applied Digital embodies the dual-edged nature of AI infrastructure investing: a sector with explosive growth potential but valuation risks that demand careful scrutiny.