Why Applied Digital Stock Is Tumbling Thursday

Applied Digital Corp APLD shares are trading lower Thursday on the heels of multiple short reports.

What Happened: Short sellers Wolf Pack Research and the Bear Cave released short reports on Applied Digital after shares rallied more than 300% year-to-date. 

Wolf Pack Research noted that Applied Digital used to be focused on Bitcoin BTC/USD mining before the AI boom. Now the company has pivoted to calling itself a low-cost AI cloud provider, the firm said. 

"The explosion of interest in AI after the emergence of Chat GPT has predictably attracted the worst promoters and scumbags to peddle fake AI wares to credulous investors, and our analysis indicates that APLD is one of these grifters because it is not an AI company," the short seller said.

The firm highlighted heavy involvement from B. Riley Asset Management and noted that Wes Cummins is both the president of B. Riley and the CEO of Applied Digital.

The Bear Cave pointed to much of the same, noting that Applied Digital has changed its business focus numerous times since its inception under the name Reel Staff in 2001, which raises questions about its most recent shift to datacenters focused on machine learning and AI.

"Shares are now up over 800% in the last twelve months, supported by a community of retail investors excited about the company’s ambition to 'lead the datacenter evolution,'" the Bear Cave said.

Applied Digital scheduled its fiscal fourth-quarter financial results and conference call for July 24 on Thursday.

Benzinga reached out to Applied Digital for comment and the company provided the following response:

"We strongly disagree with the conclusions drawn in the report. The company was never contacted by the author of the report, which contains many inaccurate and misleading claims. Over time the business will speak for itself."

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APLD Price Action: Applied Digital shares were down 15.6% at $7.56 at the time of writing, according to Benzinga Pro.

Photo: Oleg Gamulinskii from Pixabay.