Amid the intense focus on artificial intelligence, machine learning, and large language models, a growing problem is emerging: How do AI developers have enough computing power to train and run AI programs when thousands of companies are trying to build or deploy AI products?
Morgan Stanley analysts estimate that there will be a cumulative shortfall of 47 gigawatts of computing power by 2028—and the next phase of AI investment will come not from who is building the best GPUs, but who can provide the data center infrastructure and power to use them.
One solution could be the business model offered by Iren Limited (IREN), an Australian miner of Bitcoin (BTCUSD) that has expanded its offerings to provide new-generation data centers and large-scale GPU clusters for AI training and inference. Irene recently signed a five-year lease for computing power to Microsoft ( MSFT ) — a short-term arrangement that could be a powerful model for Morgan Stanley to consider for future investors.
Is Irene really a key part of what Morgan Stanley analysts tout as the next generation of AI investing?
Based in Sydney, Australia, Irene makes most of its money by mining bitcoin, but its data centers are available for rent to developers and companies that want to train and run AI models. That’s the model Irene used last month to sign a $9.7 billion deal with Microsoft for cloud computing services using Nvidia ( NVDA ) GPUs. As part of the deal, Irene announced that it has entered into a $5.8 billion deal with Dell Technologies (DELL) to purchase GPUs and peripherals.
The company has three data centers in Canada and one in Texas, which will supply the computing power for the Microsoft contract. It is also in the process of building a second data center in Texas.
Growing interest in data center capacity has been a major tailwind for IREN stock, which is up nearly 355% this year despite recent weakness (down 40% last month), helping push its market capitalization past $13 billion.
But despite the stock price increase, IREN stock is still surprisingly affordable, with a trailing price-to-earnings ratio of just 25.2 and a forward P/E of 37.6. Iren has a lower P/E than Nvidia, the world’s largest company by market capitalization. And competitors Nebius Group (NBIS) and CoreWeave (CRWV), which also provide data center services, are not yet profitable.
