Applied Digital Positioned as a Key Infrastructure Provider for AI

Roth MKM has initiated coverage of Applied Digital Corp with a Buy rating and a price target of $14 per share, according to a note released on Tuesday.

Analysts at Roth MKM highlighted that the company plays a crucial role in the ongoing artificial intelligence (AI) competition. They described Applied Digital as a “high-risk/high-return opportunity” in the context of the increasing demand for high-performance computing (HPC) driven by AI advancements.

The analysts emphasized that amidst the AI revolution, Applied Digital is well-positioned as a key infrastructure provider for AI applications. They drew parallels to the explosion of mobile applications following the launch of the iPhone, suggesting that the company could effectively address the rising computational needs stemming from AI. They expect Applied Digital to benefit from the financial inflow directed towards companies engaged in training and maintaining AI models, citing Character.ai as one of its clients.

While the analysts are optimistic about the company’s potential cash flows at scale, they also noted that significant capital investments are required to achieve operational scale.