Applied Digital Corp (APLD) shares plummeted 5.95% in after-hours trading on Thursday, continuing a volatile trend despite recent positive developments with CoreWeave. This significant drop follows an intraday decline of 5.06% and comes as a surprise given the company's recent streak of gains and strategic partnerships in the AI infrastructure space.

Earlier this week, Applied Digital announced two 15-year AI data center lease agreements with CoreWeave, a major player in the AI cloud computing sector. Following this announcement, CoreWeave disclosed in a regulatory filing that it now owns a 5.5% stake in Applied Digital, equivalent to 13.1 million shares. This stake disclosure initially drove Applied Digital's stock up by 10.5% in pre-market trading, following a 94% surge over the past three sessions.

The sharp reversal during the trading session and after-hours suggests that investors may be taking profits after the recent rally or reassessing the company's valuation in light of broader market trends. Analysts have warned about retail investors pushing into riskier, smaller AI-related stocks, potentially creating unsustainable valuations in the sector. As the AI infrastructure market continues to evolve rapidly, investors appear to be carefully weighing the long-term prospects of companies like Applied Digital against short-term excitement.