Key Points
The AI trade was hot last month, and Applied Digital saw strong bullish momentum.
The company's share price surged in conjunction with data center news and analyst price target increases.
The stock has lost some ground in June due to macroeconomic concerns.
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Applied Digital (NASDAQ: APLD) roared higher in May's trading, bounding 38% higher across the stretch. Meanwhile, the S&P 500 rose 5.2% in the month, and the Nasdaq Composite jumped 8.4%.
Investors were strongly bullish on the artificial intelligence (AI) trade last month, and many big names in the category saw massive valuation gains. Despite a pullback in June's trading, Applied Digital stock is up roughly 66% in 2026.
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May was a big month for Applied Digital
Along with bullish momentum for AI stocks, Applied Digital's valuation also moved higher in conjunction with some business-specific news last month. For starters, the company published a press release on May 4 announcing that it had secured new funding through a $300 million senior secured bridge facility. Applied Digital said that it would use the money to fund the construction of its third AI data center.
The next day, the company announced that it had completed the separation of its cloud business. As a result of the deal, the cloud unit was taken over by EKSO -- which then changed its name to ChronoScale Corporation. The renamed business began trading on the Nasdaq exchange the same day.
On May 20, Applied Digital announced that it had entered into a long-term lease agreement to facilitate the opening of its fourth AI data center. The company said that the facility will deliver 300 megawatts (MW) of critical IT load and be supported by roughly 430 of grid-connected utility power. Along with the news, multiple analysts raised their respective price targets for Applied Digital stock.
Why is Applied Digital stock moving lower in June?
After massive rallies last month, AI stocks appear to be taking a bit of a breather early in June's trading. As of this writing, Applied Digital stock is down roughly 13.5% in the month. Meanwhile, the S&P 500 is down 1.7%, and the Nasdaq Composite is off 3.5%.
Following a stronger-than-expected jobs report from the Bureau of Labor Statistics last Friday, investors have become increasingly concerned that the Federal Reserve could move to raise interest rates this year. With inflationary pressures on the rise recently, the Fed could vote to implement a rate hike in hopes of reversing the trend.
Relatively strong jobs growth makes it less likely that the central banking authority will vote for a rate cut to support economic activity and more likely that it will prioritize fighting inflation. If the Fed pivots to raising rates, it could create strong valuation pressures for Applied Digital and other highly growth-dependent AI stocks.
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Keith Noonan 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
