Applied Digital (APLD -14.00%) and Lumen Technologies (LUMN 1.48%) represent two unique ways to invest in the growing artificial intelligence (AI) market. Applied Digital builds data centers for AI services and other high-performing computing (HPC) applications that require lots of computing power. Lumen, the telecom company once known as CenturyLink, has been helping tech giants like Microsoft upgrade their data centers to process more demanding AI applications.

Over the past 12 months, Applied Digital's stock rallied more than 80% as Lumen's stock surged over 190%. Let's see why these two AI-driven companies impressed the bulls -- and if investors should buy either of their high-flying stocks right now.

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Applied Digital is still growing rapidly

Applied Digital builds and buys large data centers, makes sure they're adequately powered, and rents out the space to companies which install their own servers. It originally focused on renting out those centers to blockchain companies and Bitcoin miners, but it pivoted toward high-performance computing (HPC), AI, and machine-learning companies in late 2022. In 2023, it launched a new subsidiary, Sai Computing, to exclusively serve AI-oriented cloud service providers.

In fiscal 2023 (which ended in May 2023), Applied Digital's revenue surged 548% to $55 million as it expanded its AI-oriented data center business. In fiscal 2024, its revenue soared another 199% to $166 million as the AI boom continued. For fiscal 2025, analysts expect its revenue to grow another 55% to $256 million.

Those growth rates are incredible, but the company is still deeply unprofitable. But with an enterprise value of $1.75 billion, it doesn't seem overvalued at 7 times this year's sales. Its insiders also bought nearly twice as many shares as they sold over the past 12 months, which suggests it might have even more upside potential.

Applied Digital still has a manageable debt-to-equity ratio of 1.1, but investors should watch its ongoing dilution: It increased its share count by 136% over the past two years to cover its secondary offerings and stock-based compensation expenses.

Lumen is reinventing itself as an AI infrastructure company

Lumen is one of the largest telecom companies in the U.S., but it never expanded into the wireless market. Instead, it doubled down on expanding its wireline networks with the aim of generating steady returns from that slower-growth market. It also expanded its fiber networks and bundled more cloud, security, and collaboration tools into its business wireline plans.

However, the growth of its smaller business couldn't offset the softness of its business wireline segment -- and its revenue declined for six consecutive years. It's also unprofitable and had a staggering debt-to-equity ratio of 71.2 at the end of 2024.

All of those challenges caused Lumen's stock to drop below $1 last June. But over the following months, its stock rallied after Microsoft and several other cloud giants enlisted Lumen to upgrade their AI and cloud data center infrastructure with its fiber optic cables. The cumulative value of all of those deals reached $8.5 billion at the end of 2024.

Analysts still expect Lumen's revenue to decline 6% to $12.4 billion in 2025. But with an enterprise value of $20.4 billion, it might be undervalued at less than 2 times this year's sales -- especially if its AI deals breathe fresh life into its ailing business over the next few years. Its number of outstanding shares have also held steady over the past two years, and its insiders bought five times as many shares as they sold over the past 12 months.

The better AI play: Applied Digital

Applied Digital seems riskier than Lumen, but it's growing much faster and has more direct exposure to the AI market. Lumen's AI deals could offset its other challenges, but it needs to ramp up its spending to satisfy those big customers. Lumen's high debt levels could also limit its upside potential if interest rates stay elevated. So while both stocks have their weaknesses, I think Applied Digital will remain a better AI play than Lumen this year.