My Mac is showing way more data in the storage for applications than actually exist. Is there any way to fix it? I have run out of storage.

Your data storage should never exceed 85%.

Amended comments to MacKeeper tip - Apple Community

Explains ways you can optimize the space on your Mac. Do not try any third party optimizer utilities that operate in the background.

Do not use OneDrive, Google Cloud, or iCloud unless you have the temporary space to swap the whole contents as they are being synced with those services while the transfer is taking place. Similarly Time Machine needs the full content of the backup to make its routines work well. Bombich Carbon Copy Cloner and Shirt Pocket Superduper are far less aggressive in taking up space while doing backups.

Photos, movies, and music are the next greatest space eating monsters. Keep your archives on separate storage device for less frequently accessed items, and keep two separate archives at that. Similarly do that for DMG files for applications you have downloaded and empty your Download folder of downloads you don't frequently access.

Command-shift-period will show you invisible files.

VIew menu -> Show View Options lets you check off calculate all sizes to reveal the size of folders too. Viewing as a list view lets you easily add up all the files and folders.

If the total of files and folders in the Applications folder do not add up after showing invisible items, somewhere along the line a backup software like iCloud, Google Drive, OneDrive, or Time Machine is using up excess space duplicating the exact info being backed up.

Assuming you're using the Storage Settings in About This Mac/More Info to see the Applications storage size then my Mac too shows more storage than the actual size of the Applications folder, although nowhere close to the same extent as you. I suspect that the larger number might include data associated with the applications, which is stored in the Library. How big are the Application Support folders in Macintosh HD/Library and Macintosh HD/users/<you>/Library?