IREN stock has remained under pressure this month as investors have remained cautious of neocloud companies. It dropped to $38.70 on Wednesday, down modestly from the September high of $49.60 and by 50% from its all-time high.
IREN stock has fallen despite strong demand for AI data centers
IREN, formerly known as Iris Energy, is an Australian company that is slowly pivoting from Bitcoin mining to AI data centers. It has already inked several deals, including a $9.7 billion one with Microsoft, and the management has suggested that demand remains high. It also signed a large deal with several AI companies like Perplexity and Reflection AI.
The most recent results showed that its business was in a transition mode from Bitcoin mining to AI. Its revenue dropped from $144.8 million in the first quarter to $137.2 million. This happened as its AI cloud service revenue rose from $33 million to $70.5 million and its Bitcoin
The ongoing IREN stock weakness has mirrored the performance of other neocloud companies like CoreWeave and Nebius. It is happening as investors remain concerned about the potential bursting of the AI bubble, which Ray Dalio warned may happen any time now. He pointed to the elevated interest rates, with the ten-year yield trading at the highest level in over two decades,
There are also concerns about the rising depreciation, which remains elevated. IREN’s depreciation and amortization stood at over $112 million, a significant amount considering that its revenue was $137.2 million.
IREN and other companies believe that their GPUs have a useful life of over 6 years, while analysts like Michael Burry believe the ideal duration is less than three years. He notes that the value of their chips will drop after the launch of the new GPU models by Nvidia.
There are also concerns about the rising debt load. IREN’s debt has jumped to over $7.4 billion as the company has continued to borrow to fund its growth. In June last year, it had a debt of about $965 million. There is also a risk that it will dilute its shareholders further, with its outstanding shares rising to 380 million from 331 million in January this year.
IREN stock technical analysis
IREN stock chart | Source: TradingView
The daily chart shows that the IREN share price has slumped in the past few months despite its expected revenue surge. It has already moved below the 50-day and 100-day moving averages, a sign that bears have prevailed.
The stock has formed an ascending channel, which is part of a bearish flag pattern. It has now moved to the lower side of the channel. Also, the Relative Strength Index (RSI) and the MACD indicators have continued falling. Therefore, the most likely scenario is where the stock continues falling, with the next key target being $28.74, its lowest level in July this year.
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