While AI Panic Struck Applied Digital (APLD) Stock, the Smart Money Has a Different View

Core Insights - The article discusses the volatility and trading sentiment surrounding Applied Digital (APLD), particularly in the context of the AI sector and its recent performance [5][4][3]. Group 1: Market Sentiment and Trading Activity - Despite recent market turmoil, institutional investors show a bullish sentiment towards APLD, with net trade sentiment reaching $367,100 last week [2][1]. - The implied volatility for APLD indicates a significant price range for February expiration, projected between $15.78 and $30.18, reflecting a high-low spread of 91.25% [1]. Group 2: Company Performance and Risks - APLD's financial risks are heightened due to aggressive expansion efforts, compounded by disappointing results from major tech companies like Oracle, which have negatively impacted sentiment in the AI sector [4][5]. - The demand for machine intelligence continues to rise, suggesting that concerns about the AI sector may be premature unless evidence indicates a decline in relevance [3]. Group 3: Stock Analysis and Trading Strategies - APLD's stock is analyzed through a distributional lens, indicating potential forward 10-week returns between $21.30 and $29.20, with price clustering around $24.20 [11][10]. - A recommended trading strategy is the 23/25 bull call spread, which involves buying a $23 call and selling a $25 call, with a maximum profit potential of $110, representing a 122% payout [14][15].