Applied Digital vs. Equinix: Which AI-Infra Stock Offers More Edge?

Applied Digital (APLD) and Equinix (EQIX) are both positioned to benefit from increased demand for AI data infrastructure, but cater to different investment strategies; APLD focuses on high-growth, cost-efficient GPU-based data centers for AI startups, projecting a 73.6% EPS increase in fiscal 2026, but faces execution and profitability risks with a negative return on equity. Conversely, EQIX offers a stable, globally interconnected platform with an 8% EPS improvement expected in 2025 and a 7% return on equity, targeting enterprises and hyperscalers, though it faces challenges related to rising energy costs and competition; both stocks have a Zacks Rank #2 (Buy), but EQIX appears cheaper based on value scores.

Analysis

The burgeoning artificial intelligence sector is fueling substantial demand for data center infrastructure, creating distinct opportunities for specialized providers like Applied Digital (APLD) and established giants such as Equinix (EQIX). APLD is pursuing an aggressive growth strategy by developing GPU-intensive, cost-effective data centers, exemplified by its Ellendale, North Dakota campus and backed by partnerships with Nvidia, targeting AI startups and specialized enterprises with a pipeline exceeding 400MW and a focus on take-or-pay contracts to secure recurring revenues. Despite a significant projected EPS increase of 73.6% for fiscal 2026 for APLD, its revenue growth for the same period is estimated at a modest 2.4%, and the company remains in an early, unprofitable phase with a negative return on equity of -77.5%, facing substantial execution risks and heavy capital expenditures. Conversely, Equinix, the world’s largest colocation and interconnection provider with over 250 data centers across 71 metros, leverages its extensive Platform Equinix ecosystem and investments in AI-specific infrastructure, including high-density colocation and xScale facilities, to serve enterprises and hyperscalers. EQIX demonstrates financial stability with a positive 7% return on equity (above the industry average of 4.7%), a REIT structure offering dividend potential, and projected 2025 revenue and EPS growth of 5.2% and 8% respectively, with its EPS estimates having moved northward over the past 30 days. While both firms are poised to benefit from AI tailwinds and currently hold a Zacks Rank #2 (Buy), they present contrasting investment profiles: APLD is a high-risk, high-growth play trading at a price-to-forward sales multiple of 10.55, significantly above its five-year median of 1.43; EQIX offers greater scale and reliability, trading at a P/S of 9.14 (above its 8.81 median), but faces challenges from rising energy costs and power availability, albeit with a more favorable Zacks Value Score of 'D' compared to APLD's 'F'.

Key Decisions for Investors

• Investors with a higher risk tolerance seeking exposure to AI infrastructure growth might consider Applied Digital, acknowledging its projected 73.6% EPS surge in fiscal 2026 but carefully weighing its unprofitability, negative 77.5% return on equity, and significant execution risks tied to its large-scale buildouts.
• Investors prioritizing stability, potential dividend income from a REIT structure, and established market leadership could evaluate Equinix, which offers a 7% return on equity and an 8% projected EPS increase for 2025, while remaining cognizant of challenges related to energy costs and its price-to-sales multiple of 9.14.
• When comparing these Zacks Rank #2 (Buy) stocks, note APLD's considerably elevated P/S multiple of 10.55 against its historical median, versus EQIX's 9.14, and consider EQIX's superior Zacks Value Score ('D' vs. APLD's 'F') as part of a comprehensive risk assessment.