Hyperscalers, including Microsoft, Amazon, and Alphabet, are increasingly signing multibillion-dollar contracts with data center builders. Iren (IREN 1.45%) (formerly Iris Energy) and Applied Digital (APLD 3.61%) are two leaders in this space that have already signed large deals, sending their stocks soaring in 2025.
Leading hyperscalers are estimated to have spent $350 billion on data centers alone last year, and this is expected to grow significantly in the coming years. Iren's share price surged 285% in 2025, while Applied Digital rose 221%. Both stocks can outperform the market over the long term, but there's one reason I would buy Iren over Applied Digital.
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Iren is demonstrating superior profitability
Earlier last year, Applied Digital signed a $7 billion, 15-year deal to supply data center capacity to CoreWeave. In October, Iren announced a $9.7 billion deal with Microsoft. You could argue that Iren secured a higher-quality customer in Microsoft than Applied Digital did with CoreWeave. But that's not why I would buy Iren.
NASDAQ: IREN
Key Data Points
The most important reason to buy Iren is that it is more vertically integrated than Applied Digital. It owns extensive amounts of land, electrical infrastructure, and graphics processing units (GPUs). Applied Digital also owns land, but it is more dependent on third-party suppliers for power than Iren. Iren has power access going all the way to the substation.
Owning control of these assets allows Iren to better control costs and scale its data center build-out more rapidly. Analysts expect the company's earnings per share to increase by 175% in fiscal 2026, reaching $1.07 per share. By comparison, Applied Digital is expected to report a loss of $0.45 per share this year. This makes Iren a better investment for the long term.
