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.
While the company is growing rapidly, its first-quarter earnings report for fiscal 2026 was a dismal miss. The company posted a loss of $0.34 per share, while analysts had expected a profit of $0.14 per share.
However, this is only a waste of paper and not operational. Irene posted an unrealized loss of $665 million tied to the revaluation of financial instruments tied to its convertible notes. Losses reflect mark-to-market swings and not changes in Irene’s business performance.
Revenue of $240.3 million was up 355% from a year earlier, and net income of $384.56 million — before taking a $665 million charge — was an improvement over a net loss of $51.7 million in the first quarter of fiscal 2025. The Bitcoin mining service brought Cloud Income to $23 million in revenue. $7.3 million.
“Irene continues to execute with discipline, delivering record results this quarter and meaningful progress in our AI Cloud expansion,” said co-CEO Daniel Roberts. “We secured several new multi-year contracts, including a historic partnership with Microsoft, which strengthens Irene’s position as a leading AI cloud service provider and expands our reach into new hyperscale customer segments.”
We already know that Morgan Stanley is bullish. Other analysts’ consensus ratings are not as strong, with some growing concern in recent weeks.
Nine of the 14 analysts surveyed bar chart Irene rates the stock as a “strong buy” with two investors recommending the stock a hold and three rating it a “strong sell.” But three months ago, there were no “sell” ratings at all – a trend of cautious sentiment is slowly building.
The average price target of $85.45 is a whopping 86% upside from today’s price, and the most bullish call of $136 predicts a potential 200% jump. A lower price target indicates a potential downside of 15%.
At the date of publication, Patrick Sanders’ position was: NVDA, NBIS. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
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