What happened
Applied Digital (NASDAQ: APLD) stock gained ground during Tuesday's trading. The data-center company's share price ended the daily session up 4.1%, according to data from S&P Global Market Intelligence.
Applied Digital status published a press release this morning announcing that it had been designated as an "elite partner" by Nvidia (NASDAQ: NVDA). While Applied Digital still ended the day with significant gains, investors were initially much more bullish about the news.
So what
Applied Digital is a provider of data-center services and uses Nvidia's hardware. The company is now included as an elite partner in the Nvidia Partner Network (NPN) -- a designation that signifies that it's delivering high levels of performance. Through the NPN, Nvidia customers can find other partners that are using the semiconductor leader's products and services, and find ideal collaboration and business opportunities.
Early in Tuesday's trading, Applied Digital stock had been up as much as 17.6% following the expanded Nvidia partnership announcement. But as the market digested the news, investors took a less jubilant stance on the development. Even so, the stock is up roughly 211% year to date thanks to excitement surrounding its opportunities in computation services for artificial intelligence applications.
Now what
Nvidia is at the forefront of semiconductor hardware powering advanced AI applications. The company's graphics processing units (GPUs) are used to power OpenAI's ChatGPT and other leading artificial intelligence services, and it looks like the company is poised to maintain a leadership position in its corner of the market. The fact that Applied Digital has been given elite-partner status within the NPN is a positive development, but it remains to be seen just how much of a performance driver its inclusion in the category will be.
Applied Digital may be able to score new contracts or collaborations thanks to its new status in the Nvidia Partner Network, but it's not clear that the development will be a major performance catalyst. It seems like investors may have initially interpreted the news as an indication that Applied Digital and Nvidia are expanding a contractual partnership and that the latter company would see a significant sales boost as part of the potential deal. Applied Digital's new elite-partner designation could open some valuable doors, but it remains to be seen how things play out on that front.
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Keith Noonan 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.
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