TLDR
- Applied Digital (APLD) stock jumped 8.5% on Friday, continuing a massive rally that has more than doubled shares in one week
- The company secured a $7 billion revenue deal over 15 years with AI specialist CoreWeave for data center services at its North Dakota facility
- May jobs data showed modest economic growth, raising hopes for Federal Reserve interest rate cuts that could benefit growth stocks
- Technical analysis shows the stock broke out of a cup and handle pattern with strong volume, suggesting potential for further gains
- Key resistance levels to watch are $17, $28, and $46.70, with major support at $10.50
Applied Digital stock posted another strong day on Friday, closing up 8.5% as investors continued to pile into the data center company. The rally extends a remarkable week-long run that has seen shares more than double.
The latest gains came after the Bureau of Labor Statistics released May employment data. The report showed the U.S. economy added 139,000 jobs last month, beating the forecast of 125,000.
More importantly for growth stocks like Applied Digital, the jobs report revised previous months downward. April’s job growth was cut by 30,000 and March by 65,000.
This revision suggests the economy is growing at a more modest pace. That makes Federal Reserve interest rate cuts more likely this year.
Lower interest rates typically help growth stocks perform better. Investors are betting this environment will continue to fuel Applied Digital’s momentum.
CoreWeave Deal Drives Week-Long Rally
The real catalyst behind Applied Digital’s explosive week came from a massive contract announcement. The company revealed it signed a deal to lease data center space to CoreWeave, an AI infrastructure specialist.
The agreement covers Applied Digital’s Ellendale, North Dakota campus. CoreWeave will host its AI infrastructure at the facility over multiple contracts spanning 15 years.
Applied Digital expects the deal to generate more than $7 billion in total revenue. The company describes this as accelerating its strategic expansion into advanced compute infrastructure.
Both Applied Digital and CoreWeave have backing from AI chip giant Nvidia. This connection highlights the tight relationships forming across the AI infrastructure ecosystem.
The CoreWeave partnership represents a major win for Applied Digital. It provides long-term revenue visibility in the fast-growing AI infrastructure market.
Technical Breakout Signals More Gains Ahead
From a technical perspective, Applied Digital’s chart shows bullish signals. The stock has formed what analysts call a cup and handle pattern.
Last week’s rally pushed shares decisively above the pattern’s top trend line. This breakout occurred on heavy trading volume, suggesting strong conviction from institutional buyers.
The relative strength index shows bullish momentum without reaching overbought levels yet. This indicates the rally could have more room to run.
Technical analysts have identified three key resistance levels to watch. The first comes around $17, near the stock’s April 2022 high.
If shares push above that level, the next target sits at $28. This area matches prominent peaks from late 2021.
Using the cup and handle measuring principle, analysts project a longer-term target of $46.70. This would represent a 345% gain from the pattern’s base.
During any pullbacks, traders should watch the $10.50 level as major support. This represents the top of the previous trading range that could now act as a floor.
Applied Digital now trades at roughly 12 times expected sales for this year. While that valuation reflects high growth expectations, the CoreWeave deal suggests the company is entering a new growth phase that could justify the premium.
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