IREN's AI Cloud Push Hinges on Microsoft, NVIDIA Timelines

A new bull thesis on IREN Ltd. says the Bitcoin miner's shift into AI cloud computing can turn contracted demand into profit. Sergey, writing on Compounding Your Wealth's Substack, argues that secured power and the NVIDIA partnership give the company a path to earnings despite the cost of construction. The stock traded at $37.93 on Aug. 6, with a trailing P/E of 47.82 and a forward P/E of 136.99, according to Yahoo Finance.

The quarterly numbers show why the market is looking past the mining business. In the third quarter of fiscal 2026, revenue fell to $144.8 million from $184.7 million the prior quarter. Adjusted EBITDA dropped to $59.5 million from $75.3 million, and the company posted a net loss of $247.8 million. Bitcoin mining revenue slid to $111.2 million from $167.4 million after older hardware was retired. AI Cloud revenue nearly doubled to $33.6 million from $17.3 million.

The loss included $140.4 million in non-cash write-downs and $23.7 million in unrealized losses tied to financial hedges. Sergey argues the mining decline is not what investors are pricing. The bet, he says, is that AI Cloud becomes a much larger infrastructure business. Management targets 480 megawatts of capacity and 150,000 GPUs by year-end, with $3.7 billion in annual recurring revenue.

Booked Capacity and the NVIDIA Contract

Secured power has reached 5 gigawatts, with new sites planned in Europe and Asia Pacific. The first phase of the Childress site, Horizon 1, is set to be handed over to Microsoft in the third quarter. Three more phases are planned by year-end. About 3,000 workers are on site. Converting existing sites in British Columbia and Texas to air-cooled systems offers a faster route to revenue than building new liquid-cooled data centers, Sergey writes. All current capacity is already booked by customers, he adds, which makes supply, not demand, the binding constraint.

The two contracts anchoring the story are with NVIDIA and Microsoft. IREN holds a five-year, $3.4 billion AI Cloud contract with NVIDIA expected to generate about $700 million a year on 60 megawatts of Blackwell chip capacity at Childress. NVIDIA has committed up to $2.1 billion in investment, paid out gradually while infrastructure is built. The commitment becomes fully invested once IREN deploys 600,000 GPUs. Microsoft remains the most important customer, and about 95% of the money needed for GPU purchases is expected to come from customer prepayments and equipment financing rather than IREN's own cash.

Construction and Delivery Risk

The biggest risks are construction cost and delivery. IREN has not yet handed over a completed site to a customer. IREN is relying on a small group of large customers and integrating two recent acquisitions, Mirantis and Nostrum. Higher borrowing costs or construction delays would make the 2026 targets harder to hit.

Hedge fund ownership rose in the first quarter. According to the analysis, 53 funds held IREN, up from 46. Core Scientific was held by 81 funds, up from 76. Applied Digital's count fell to 39 from 40, and Hut 8's to 60 from 64. IREN showed the biggest increase among the four, though Core Scientific remains the most widely held.

Short interest tells a different story. About 27.09% of IREN's available shares are sold short, the highest in the group. Applied Digital follows at 26.33%, Core Scientific at 22.43%, and Hut 8 at 11.58%. Sergey sees the short interest as skepticism about heavy spending and the delivery schedule.

The stock has already climbed. IREN's share price is up about 316% since a May 2025 thesis on the stock, the write-up says.

AlphaScala's Alpha Score for IREN sits at 38 out of 100, a Mixed rating. The Horizon 1 handover to Microsoft is scheduled for the third quarter, with three more phases planned by year-end.