IREN (NASDAQ:IREN) looked like an unstoppable growth stock from April to the end of October, gaining more than 1,000% during that stretch. More investors realized how well-positioned IREN is to address the AI energy bottleneck, and multi-billion dollar big tech deals have translated into substantial revenue growth.
However, IREN has since dipped by more than 40% from its all-time high. While it’s normal for stocks to pull back from time to time, the current drop is a bit jarring.
Why IREN Stock Lost Value
A lot of the hoopla started when investors questioned Oracle’s (NASDAQ:ORCL | ORCL Price Prediction) heavy debt load for the OpenAI deal. Capital expenditures came under pressure, and people wondered how OpenAI would be able to pay $300 billion over five years. That contract starts in 2027, and rumors circulated that OpenAI pushed back its data center completion to 2028, a year later than initially planned. It put more pressure on AI data center providers like IREN, even though Oracle refuted the rumor on the same day.
Investors were also rattled by Broadcom’s (NASDAQ:AVGO) earnings in December due to tightening margins. However, its AI segment is still robust. That part of the business grew by 74% year-over-year in Q4 FY25, and Broadcom anticipates AI sales doubling year-over-year in Q1 FY26.
IREN and other AI stocks moved down in sympathy with this news. A debunked rumor with Oracle and OpenAI, two companies that don’t impact IREN’s finances, and Broadcom’s soaring AI business, was enough to crash IREN. You can’t even pin it on Bitcoin (CRYPTO:BTC), which is down by 4% over the past month compared to IREN’s 16% decline.
IREN also issued $2.3 billion worth of debt in December, but more than a quarter of that money went toward repaying debt with higher interest rates and shorter maturities. IREN needs money to finance its AI data centers, so it makes sense that the company has to borrow some money. It got great terms and got rid of its less favorable debt.
The AI Thesis Is Intact
Nothing about IREN’s business or long-term goals changed during its 40%+ decline. IREN still has a 5-year, $9.7 billion deal with Microsoft (NASDAQ:MSFT) and has a multi-gigawatt pipeline. IREN hasn’t changed its plan to generate $3.4 billion in annual recurring revenue from its AI cloud segment by the end of 2026. AI cloud revenue only came to $16.4 million in fiscal 2025, so it’s a quantum leap to reach $3.4 billion in one year. It’s easy to envision IREN having an ambitious AI cloud revenue target for fiscal 2027 as the upcoming year materializes.
AI chips were the previous bottleneck in the AI race. Multiple chipmakers became trillion-dollar companies because they had the best solution available to the prevailing bottleneck. Energy is the next bottleneck, and IREN is uniquely positioned to solve that problem. IREN’s pipeline already has enough energy to support several deals like the Microsoft one, and big tech has been on record saying that they will increase their AI budgets next year.
IREN Co-founder Dan Roberts recently posted on X comparing IREN to a railroad builder. The infrastructure remains for centuries, but the trains (i.e., AI chips) change. Roberts emphasized that the infrastructure and power sticks around, offering a good metaphor for IREN’s positioning in the AI boom. The AI thesis is intact, and the fact that Roberts is posting on social media more often may attract more investors to the stock. It’s similar to how Tesla (NASDAQ:TSLA) and Palantir (NASDAQ:PLTR) have developed a cult following around their respective founders.
Any New Deals Can Result In Seismic Revenue Growth
The Microsoft deal averages out to $1.94 billion per year for five years. IREN structured the deal so Microsoft has to make a 20% prepayment, which addresses IREN’s immediate capital needs. The deal covers 200 megawatts, and IREN can support additional deals like it.
If IREN lands a deal with the same terms, it ends up with $3.9 billion in annual recurring revenue, just with those two deals. IREN just needs one big deal to achieve its forecasted 2026 AI cloud annual recurring revenue goal. Investors may be underestimating how quickly IREN can gain momentum if it signs multiple deals like the Microsoft one in 2026 and 2027.
Five deals like the Microsoft contract will bring in roughly $10 billion in annual recurring revenue. IREN already has the energy, land, and infrastructure to support various companies’ AI ambitions. IREN can also make more deals with Microsoft and give the tech giant more megawatts in exchange for additional annual recurring revenue.
Yes, the stock has rallied considerably this year, but the fundamentals warrant the excitement. The drop doesn’t have much behind it, and IREN should reclaim its all-time high next year.
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