Key Points
Demand for capacity in AI data centers remains extremely robust.
Applied Digital is in the business of constructing and operating AI data centers.
The remarkable growth the company could deliver makes the stock an ideal long-term investment.
- 10 stocks we like better than Applied Digital ›
Buying shares in leading companies operating in fast-growing or disruptive niches is a proven way to make money over the long run. In fact, investing in the right stocks and holding them for a long time can even help investors retire as millionaires.
For example, if you had invested $10,000 in Nvidia a decade ago and held onto it through all the ups and downs that followed, your stake would now be worth $2.2 million. In a similar vein, I think it would be a good idea to invest in Applied Digital (NASDAQ: APLD) stock right now, as it's operating in the fast-growing data center space and poised to deliver remarkable long-term growth.
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Of course, relying on just one stock to grow your portfolio to seven figures is not the right strategy. Any crack in that company's growth story could take the wind out of your returns. However, making Applied Digital stock a part of a diversified portfolio could give your wealth a nice boost in the long run.
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Applied Digital is poised to win big from its lucrative lease contracts
The artificial intelligence (AI) revolution has supercharged the data center market. Hundreds of billions of dollars are being spent to construct data centers built specifically to handle AI workloads. Applied Digital specializes in designing, building, and operating these types of data centers.
In the first six months of its fiscal 2026, its revenue increased by 176% from the prior-year period to $191 million. Its pace of revenue growth could continue to improve due to the new data center campuses that it plans to construct.
The company already has $16 billion worth of lease contracts with hyperscalers and neocloud companies in the bag for the next 15 years. These leases are for 600 megawatts (MW) of data center capacity at two campuses that are currently under construction in North Dakota. Applied Digital says these campuses will be completed in 2026 and 2027, paving the way for solid top-line growth over the next couple of years.
Importantly, Applied Digital is in discussions with more hyperscalers for deals that will require it to bring additional data center capacity online. That's the reason why the company believes that it is "well positioned to begin construction of additional campuses in the near term."
So, it is easy to see why analysts expect Applied Digital's growth to accelerate nicely.
APLD Revenue Estimates for Current Fiscal Year data by YCharts.
The stock's expensive, but look at the bigger picture
Applied Digital trades at 25 times sales, which is well above the U.S. technology sector's average multiple of 7.3. However, Applied Digital has the potential to deliver above-average sales growth, which should help it to justify that premium.
Additionally, the company believes that it can build 5 gigawatts (or 5,000 MW) of data center capacity by 2032, including a build-out of three additional campuses for which contract discussions are currently in advanced stages. This should ensure outstanding growth at Applied Digital for years to come, which is why investors looking to retire with million-dollar portfolios should consider buying this AI stock.
Should you buy stock in Applied Digital right now?
Before you buy stock in Applied Digital, consider this:
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
