Iren (IREN 1.81%) has more than tripled this year, comfortably outpacing the S&P 500, due to its pivot to AI infrastructure. However, the growth stock has lost more than 50% of its value in less than two months. Misguided concerns about an artificial intelligence (AI) bubble have put considerable pressure on leaders like Iren, and the recent drop looks like an attractive buying opportunity.
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What's driving the current drop
Some of Iren's recent losses and declines in the broader AI market are based on questionable rumors. For instance, an article came out saying that Oracle's $10 billion data center was in limbo after financing talks with Blue Owl stalled. However, Oracle told investors the same day that its Michigan data center project is still on track, even without financing from Blue Owl. Oracle also had to push back on a report that its OpenAI data centers would be delayed.
NASDAQ: IREN
Key Data Points
The Oracle rumor mill had an impact on most AI stocks, including Iren. Rising capital expenditures and questions about sustainable debt also emerged, but not all AI stocks are in that situation. Iren has a pristine balance sheet that features a 5.52 current ratio, which means it can comfortably keep up with current obligations.
Iren also has a five-year deal with Microsoft, so worries about how OpenAI can afford to pay Oracle don't apply to Iren.
Declining Bitcoin (BTC 0.38%) prices are a short-term headwind for Iren. While its long-term future revolves around AI infrastructure, the company made 97% of its revenue for the first quarter of fiscal year 2026 (ended Sept. 30) from crypto mining. It's still the main revenue driver that helps fund its data centers, and any drop in Bitcoin prices translates into lower revenue and profits.
AI data infrastructure is the future
Iren has still outperformed Bitcoin year to date, but the recent drop for both of these assets suggests they are still linked. However, that link should weaken over time, giving Iren the opportunity to rally even if Bitcoin prices stay flat.
That's because the AI data center provider anticipates $3.4 billion in annual recurring revenue (ARR) by the end of 2026. All of this revenue will come from AI cloud demand. For the sake of comparison, Iren brought in $501 million in fiscal 2025 (ended June 30), with approximately 97% of it coming from crypto mining.
The jump to $3.4 billion in ARR has a good foundation due to the Microsoft deal. Iren has enough energy to support multiple deals like the Microsoft one, which can boost ARR even quicker.
Although the AI trade hasn't looked good over the past month, chipmakers have still reported exceptional demand for their AI products. Broadcom delivered 74% year-over-year revenue growth for its AI semiconductors in the fourth quarter of fiscal year 2025 (ended Nov. 2), while Micron Technology crushed expectations and delivered optimistic guidance. Micron's revenue increased by 56.6% year over year in the first quarter of fiscal year 2026 (ended Nov. 27).
Both earnings results suggest that AI demand is still surging despite a temporary slowdown in the AI trade. As more investors realize the recent disconnect and the Oracle drama recedes into the past, Iren can rally and become a promising stock in 2026. Investors just have to remain patient during this challenging stretch. Even the best stocks have bad months and quarters.
