TipRanks Smart Growth Portfolio #1: Where AI Lives
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Dear Investors,
We are pleased to share that we have totally revamped our Smart Growth Newsletter – and you will now be getting even more value!
Now, in addition to the carefully selected high-quality Growth stock recommendation you receive every Friday, you will also get access to our carefully curated Model Growth Portfolio, as well as important updates on our Portfolio stocks – all in the same Newsletter.
We are starting our Growth portfolio with 10 stocks which have been chosen from past Growth Newsletter recommendations. These stocks have earned our strongest conviction. However, stock markets are anything but static, which means that the list of long-term Growth winners may expand and/or change. Whenever this happens, we will present you with a comprehensive analysis behind our decision.
We look forward to investing alongside you and hope you enjoy our newly minted Smart Growth Portfolio and Newsletter.
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Portfolio News and Updates
❖ Stock markets are in flux, torn between tariff worries, economic concerns, and fears that high-flying tech stocks have far outrun their near-term potential. With bears in control, it might seem like bad timing to have exposure to growth stocks. However, it’s important to remember that Smart Growth is a long-term portfolio. We choose holdings based on their long-term potential – overlooking short-term fluctuations – but if bad news emerges that could hamper that potential, we won’t hesitate to hit the “Sell” button and notify our Smart Growth investors.
Growth stocks tend to be highly volatile even during market rallies. However, despite recent market turmoil, our newly minted Portfolio has performed well. The majority of holdings show notable gains – not just since their recommendation date, but also year-to-date – while all key benchmark indexes have slipped into the red.
The standout outperformer is ACM Research (ACMR), which surged after reporting stellar quarterly results, adding to its previous gains. The stock is now up over 45% since we recommended it in November 2024. In addition, Nutanix (NTNX) and EverQuote (EVER) are both up strongly in a much shorter time frame. We recommended NTNX on January 24th and EVER on February 7th, and they’ve wasted no time delivering strong returns.
The performance of all Portfolio stocks is displayed in a table at the bottom of this Newsletter.
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This Week’s Top Growth Pick: Applied Digital Corporation (APLD)
Applied Digital Corporation, Inc. operates next-generation data centers optimized for high-performance computing, artificial intelligence, and blockchain applications. Its infrastructure supports intensive workloads by providing scalable, energy-efficient hosting and cloud services. The company specializes in high-density computing environments, leveraging strategic locations and advanced cooling technologies to maximize efficiency and reduce costs. Applied Digital’s platform enables AI model training, machine learning inference, and cryptocurrency mining, catering to enterprises seeking robust, high-speed processing power. With a focus on sustainability and cost-effective operations, the company delivers flexible computing solutions designed to meet growing demand for AI-driven workloads and digital asset infrastructure. Applied Digital partners with industry leaders to expand its capabilities, positioning itself as a key player in the evolving landscape of AI and decentralized computing.
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From Blocks to AI
Founded in 2001, Applied Digital Corporation initially focused on blockchain hosting and digital infrastructure. Originally named Applied Blockchain, it rebranded to Applied Digital in 2023 to reflect its broader focus on high-performance computing (HPC) and AI infrastructure. This strategic shift was driven by the growing demand for AI compute power and the opportunity to leverage its expertise in energy-efficient data center operations.
Applied Digital went public in 2022 on the Nasdaq under the ticker APLD, securing capital to expand its data center footprint. The company has since completed secondary offerings in 2023 and 2024 to fund further expansion.
A major catalyst for APLD’s expansion came in 2024, when NVIDIA acquired a 3.6% equity stake in the company. This partnership enabled Applied Digital to integrate NVIDIA’s GPUs into its cloud computing services, strengthening its position in the AI and high-performance computing market. NVIDIA’s investment reinforced APLD’s role in AI infrastructure and provided financial and technological credibility.
In addition, APLD collaborates with Dell Technologies for enterprise-class compute hardware and Super Micro Computer for high-performance servers, alongside other major hardware and infrastructure providers. The company has also formed strategic partnerships with software vendors such as Together AI, Run:AI, among others, enhancing its ability to offer cutting-edge AI cloud solutions. This cohesive ecosystem allows APLD to focus on its core strengths, continuously refine its offerings, and deliver value to its customers, fueling rapid growth.
APLD’s ability to execute large-scale projects and attract major partners has validated its market position. In 2024, it secured a multi-year exclusivity agreement (LOI) with a hyperscaler for 400 MW of capacity – covering the 100 MW currently under construction and two future 150 MW buildings at Ellendale. Landing a hyperscale cloud client is a significant milestone, underscoring that APLD’s facilities meet top-tier AI infrastructure requirements.
In January 2025, Applied Digital secured a transformative funding agreement with Macquarie Asset Management for up to $900 million to finance its Ellendale HPC campus, with an option for an additional $4.1 billion over the next 30 months. This partnership grants Macquarie a 15% equity stake in APLD’s HPC business, while APLD retains 85% ownership. The capital infusion allows the company to repay debt, recover over $300 million of its equity investment in Ellendale, and accelerate expansion beyond 2 gigawatts of total AI and HPC data center capacity.
Beyond Macquarie, Applied Digital has attracted institutional investments from BlackRock, Venrock, and other major asset managers. Such backing from leading investors suggests that APLD is seen as a key player in the HPC and AI compute sector. While smaller than industry titans, APLD’s strategic focus and deep partnerships have positioned it as a competitive force in the rapidly growing AI and HPC markets.
Source: Applied Digital Investor Presentation March 2025
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Scaling Smarter
Applied Digital provides cutting-edge infrastructure for the most compute-intensive industries. Operating at the crossroads of blockchain and AI, it designs, builds, and manages next-generation data centers optimized for high-performance computing (HPC), GPU-driven AI workloads, and cryptocurrency mining. This dual focus gives it a unique position in a fast-evolving landscape, bridging the energy-hungry needs of blockchain with the surging demand for AI supercomputing.
Unlike traditional data center giants, Applied Digital is lean, specialized, and strategically located. Its facilities are purpose-built for power-intensive operations, leveraging low-cost energy sources to drive down costs. The company’s Ellendale, North Dakota campus, a 100-megawatt facility, is designed for large-scale AI training and inference workloads with ultra-efficient cooling. This energy-conscious model gives APLD an edge in an industry where power efficiency dictates profitability.
Applied Digital operates in three segments: Data Center Hosting (for blockchain clients), Cloud Services (GPU computing for AI/ML), and HPC Hosting (for enterprise supercomputing). While its 286 MW of crypto-hosting capacity provides stable revenue, AI and HPC are now its core focus. In 2024, it secured a multi-year exclusivity agreement with a major hyperscaler, reinforcing its ability to meet the rigorous demands of top cloud providers. When the full 400 MW lease at Ellendale is finalized, APLD is expected to see a significant long-term revenue boost.
The Cloud Services division, launched in 2024, is scaling rapidly, with multiple GPU clusters deployed and major AI clients onboard. Demand for AI compute power is soaring, and Applied Digital’s ability to deploy GPU infrastructure quickly positions it as a major player.
Beyond its existing portfolio, Applied Digital is aggressively marketing new data center campuses totaling 1.4 gigawatts of potential capacity. Moreover, blockchain remains a valuable asset in its portfolio, enabling APLD to monetize or repurpose crypto-hosting assets as market conditions shift (as seen in its 2024 sale of a Texas data center to Marathon for $25 million).
By combining high-performance infrastructure with cost-efficient operations and deep industry partnerships, Applied Digital has carved out a distinct and competitive niche. In a market where computing power is the new currency, APLD is scaling fast – and smart.
Source: Applied Digital Investor Presentation March 2025
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Adaptive Edge
Applied Digital operates at the crossroads of blockchain mining and AI-driven computing, two of the most disruptive tech trends. While once separate, these industries are converging, creating opportunities for companies that can adapt. APLD is doing just that – leveraging its high-performance, power-dense data centers to serve both sectors while maintaining the flexibility to shift focus as markets evolve.
The crypto mining industry is cyclical, booming with Bitcoin’s price surges and tightening with regulatory changes or halving events. The 2024 Bitcoin halving has squeezed margins, pushing miners to seek ways to improve efficiency or pivot their infrastructure toward more stable, long-term revenue sources. A key trend has been the conversion of mining data centers into AI compute facilities, allowing miners to repurpose their hardware and energy contracts for more lucrative HPC workloads. Applied Digital, once a blockchain host, is ahead of this curve, aggressively expanding into AI and diversifying revenue beyond crypto volatility while tapping into a much larger growth opportunity.
On the AI side, demand for high-performance computing power has skyrocketed as companies race to train larger models. A recent Morgan Stanley report warns of a 36-gigawatt shortfall in U.S. data center power by 2028, underscoring a severe capacity crunch. This fuels demand for specialist infrastructure providers that can deliver dedicated AI compute at scale. In this gold rush for computing power, companies that can deploy capacity quickly and cost-efficiently stand to benefit the most.
With demand surging, competition is intense. Applied Digital faces challengers across hyperscalers, crypto miners pivoting to AI, and specialized AI infrastructure firms. Yet, APLD competes effectively on all fronts. Unlike hyperscalers, it focuses exclusively on compute-intensive applications, optimizing every aspect of its infrastructure for AI and blockchain. While many miners are just beginning to explore HPC, Applied Digital has already built a dedicated AI hosting business, secured major clients and institutional backing, and differentiated itself with cost-efficient, strategically located facilities. Against specialized HPC providers, APLD’s affordable, high-performance solutions give it a competitive edge in a price-sensitive market.
Applied Digital’s hybrid business model provides a level of flexibility that few competitors can match, ready to seize the opportunities in both AI infrastructure and crypto – proving that in the world of next-gen computing, agility is just as important as scale.
Source: Applied Digital Investor Presentation March 2025
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Numbers in Motion
Applied Digital is in a high-growth phase, rapidly scaling its revenue base while reinvesting aggressively in infrastructure. The company’s expansion into AI-driven cloud computing and HPC hosting is driving triple-digit growth, positioning it as a rising force in digital infrastructure.
For FY2024 APLD’s revenue soared to $165.6 million, a 199% year-over-year increase, reflecting both increased data center capacity and the rapid ramp-up of its AI cloud services business. This momentum carried into FY2025, with FQ1 revenue up 67% and FQ2 up 51% YoY, reaching $63.9 million. Growth is being fueled by the Cloud Services segment, which saw an astonishing 523% year-over-year increase in FQ2 2025, reaching $27.7 million. This validates Applied Digital’s successful pivot into high-performance computing for AI workloads.
Despite its top-line surge, APLD remains unprofitable, as it is prioritizing capital-intensive expansion over short-term margins. In FQ2, the company reported a net loss of $138.7 million, though this was significantly impacted by $87.2 million in fair value debt adjustments and $25.4 million from debt conversions. On an adjusted basis, net loss was $12.6 million, compared to $5 million in Q2 FY2024, reflecting continued investment in scaling operations.
Encouragingly, profitability metrics are improving. Adjusted EBITDA more than doubled year-over-year to $21.4 million, highlighting stronger operating leverage as revenue scales. The company is also outperforming analyst expectations on adjusted EPS, signaling progress toward breakeven.
Applied Digital maintains strong financial flexibility, with $314.6 million in cash and equivalents as of the end of fiscal Q2. This liquidity was reinforced by a $450 million convertible notes offering and a $191.6 million stock issuance, providing ample resources for expansion. While total debt stood at $479.6 million, the company has secured transformative financing – including up to $5 billion from Macquarie – which strengthens its ability to aggressively scale HPC infrastructure while reducing reliance on short-term debt.
With record-breaking AI demand and major hyperscaler negotiations in late-stage talks, Applied Digital is on track for continued high-revenue growth, narrowing losses, and a potential long-term transition to profitability.
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Valuing the Future
Applied Digital’s stock is up over 70% in the past 12 months, outperforming many tech and infrastructure peers. However, a post-earnings pullback of ~10% followed the company’s latest report, largely due to a wider net loss and broader market anxiety. Despite this, the dip has made APLD’s valuation more compelling, with its Price-to-Sales (P/S) ratio falling to ~5.4, well below its multi-year average.
Valuing APLD isn’t straightforward. While its crypto mining roots make comparisons to blockchain firms tempting, the company’s growth is now AI-driven, with Cloud Services and HPC hosting fueling most revenue expansion. Despite this shift, APLD trades at a lower P/S multiple than its blockchain peers, even though most of those stocks have significantly underperformed in recent months.
In the HPC infrastructure space, APLD competes with several private AI hosting firms, making direct public-market comparisons difficult. However, the most relevant peer is Core Scientific (CORZ)—a former Bitcoin miner that secured a multi-billion-dollar AI hosting deal, making it the best transition case study for APLD. Despite APLD’s faster revenue growth and stronger stock performance year-to-date, its P/S ratio is roughly in line with CORZ, suggesting a potential valuation disconnect.
Wall Street sentiment remains strongly bullish. According to TipRanks-rated top analysts, APLD is a “Strong Buy,” with an average 12-month price target implying over 84% upside. Despite its small-cap status, analyst coverage is extensive, with eight firms actively following the stock—a sign of institutional investor interest. Notably, Northland Securities nearly doubled its price target post-earnings, implying over 185% upside from current levels.
With AI-driven revenue surging, a strong institutional investor base, and analyst optimism, APLD remains a high-growth stock with significant upside potential in the AI infrastructure boom.
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To Sum It All Up
Applied Digital is a next-generation data center operator specializing in high-performance computing, AI infrastructure, and blockchain hosting. The company has successfully transitioned from its crypto-mining roots to become a key player in AI-driven cloud services, rapidly scaling its HPC capacity. Strategic partnerships with industry leaders, including NVIDIA and Macquarie, provide financial strength and technological credibility. With a growing portfolio of energy-efficient data centers and exclusive agreements with major cloud providers, Applied Digital is capitalizing on the surging demand for AI compute power. Though still unprofitable due to aggressive expansion, profitability metrics are improving, and institutional investor confidence remains strong. Its stock is trading at an attractive valuation compared to its peers, with analysts highlighting significant upside potential. Positioned at the intersection of AI and digital infrastructure, Applied Digital is well-placed to benefit from the explosive growth in high-performance computing and next-gen data center services.
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Smart Growth Portfolio
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Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
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