Amid the intense focus on artificial intelligence, machine learning, and large language models, a burgeoning problem is emerging: how will AI developers have enough computing power to train and run AI programs when thousands of companies are seeking to build or use AI products?
Morgan Stanley analysts are projecting that there will be a cumulative shortfall of 47 gigawatts of computing power through 2028—and the next phase of AI investing will not be who’s building the best GPUs, but who can best provide data center infrastructure and the power to use them.
A solution may be the business model provided by Iren Limited (IREN), an Australian miner of Bitcoin (BTCUSD) that has expanded its offerings to deliver next-generation data centers and large-scale GPU clusters for AI training and inference. Iren recently signed Microsoft (MSFT) to a five-year lease for computing power—a short-term arrangement that Morgan Stanley says may be a powerful model for investors to consider in the future.
Is Iren really a key part of what Morgan Stanley analysts identify as the next generation of AI investing?
Based in Sydney, Australia, Iren makes most of its money by mining Bitcoin, but its data centers are also available for rent for developers and companies that want to train and run AI models. That’s the model that Iren 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, Iren announced that it entered into an agreement with Dell Technologies (DELL) to purchase $5.8 billion of GPUs and ancillary equipment.
The company has three data centers in Canada and one in Texas, which will supply the computing power for the Microsoft deal. It’s also in the process of building a second data center in Texas.
The growing interest in data center capacity has been a major tailwind for IREN stock, which, despite its recent weakness (down 40% in the past month), is up nearly 355% so far this year, helping to push its market capitalization over $13 billion.
But despite the stock price growth, IREN stock is still surprisingly affordable, with a trailing price-to-earnings ratio of only 25.2 and a forward P/E of 37.6. Iren has a lower P/E than Nvidia, which is the biggest company in the world by market capitalization. And competitors Nebius Group (NBIS) and CoreWeave (CRWV), which also offer data center services, aren’t profitable yet.
