This AI Company Was the Most Shorted Tech Stock in December. Does That Mean a Short Squeeze Is Coming in 2026?

Core Viewpoint - Applied Digital (APLD) is experiencing high short interest, indicating skepticism about its fundamentals despite the company's growth potential in the digital infrastructure sector [1][6]. Company Overview - Applied Digital is based in Dallas, Texas, and focuses on designing, building, and operating digital infrastructure, particularly data centers for high-performance computing and AI needs [4]. Stock Performance - APLD stock has gained 42% year-to-date (YTD) and has increased by 267% over the past year, significantly outperforming the S&P 500's 14% return during the same period [2][5]. - The stock's volatility has been influenced by the presence of short traders and high valuation, with a price-to-sales (P/S) ratio of 72.5 times, indicating a high valuation for a company that is not yet profitable [5][6]. Market Dynamics - The high short interest can create upward momentum in stock prices if traders are forced to buy back shares as the stock price rises [2]. - Despite the expected high demand for data centers, Applied Digital's status as a non-established player in the industry raises concerns about its long-term viability and potential cash flow issues [7].