Bernstein Adjusts Price Target for IREN Amid AI Transition
On Monday, analysts at Bernstein reduced their price target for IREN’s stock from $125 to $100 per share. However, they still consider it a leading choice among stocks focused on artificial intelligence. The firm noted that the company’s shift into a large-scale AI cloud provider is significant and that it’s expected to phase out its crypto mining operations over the next few years.
This adjustment in the price target reflects two main aspects that are not directly linked to IREN’s business outlook: a decrease in Bitcoin mining activity and an increase in shares due to a recent stock issue. Despite this, the analysts believe that IREN’s AI prospects remain intact.
A key element of IREN’s growth is a substantial agreement with Microsoft. IREN has allocated 77,000 of its 150,000 GPUs to Microsoft under a five-year deal, which generates approximately $1.94 billion annually. The leftover GPU capacity is being sold to cloud customers on demand, with contracts worth $400 million established as of February.
To support this expansion, IREN has also made a $5.8 billion purchase agreement with Dell for Nvidia GB300 processors and acquired $3.6 billion in GPU-backed financing at an interest rate below 6%. Analysts suggest that Microsoft’s initial payment will cover around 95% of the capital needed for the arrangement.
Looking ahead, Bernstein anticipates that IREN’s AI cloud revenue could hit $2.6 billion by 2027 and escalate to $6 billion by 2030. They predict the company will operate 275,000 GPUs by 2030, increasing from the current 150,000. Moreover, adjusted EBITDA margins are expected to stabilize near 82%, which may lead to earnings of almost $5 billion by decade’s end.
IREN holds 4.5 gigawatts of electricity capacity across Texas, British Columbia, and Oklahoma, underlining its long-term growth potential. Bernstein has valued IREN’s 3.6 gigawatts of undeveloped capacity in Sweetwater and Oklahoma at $3 million per megawatt, contributing around $10.8 billion to the company’s overall valuation.
In the revised model, Bitcoin mining, which used to be at the heart of IREN’s operations, is now considered to have zero value. Analysts project a steep decline in mining revenues within the next few years, anticipating it will hit zero by fiscal 2030 as the company converts mining hardware for cloud services.
Several other notable Bitcoin mining firms have also embraced AI opportunities recently, with some even exiting crypto mining altogether in light of the AI surge.
IREN’s stock recently traded at $43.78, experiencing a drop of over 9% amid a selloff in AI stocks linked to a report about OpenAI’s underperformance. Nonetheless, over the past month, IREN’s stock has increased by nearly 25%. Given the current pricing, Bernstein’s target hints at a potential upside of about 128% for investors.
