Iren's (IREN -3.81%) announcement about its Sweetwater site brought good news and came at the perfect time for neocloud investors. It aligned with Nebius (NBIS -5.09%) being selected as Palantir's (PLTR -2.17%) preferred sovereign AI partner.
Neoclouds, which operate cloud computing centers, have been enjoying a nice rally due to this string of bullish news, but Iren's Sweetwater announcement contains valuable insights that point to long-term growth.
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The 2-gigawatt Sweetwater site reached an expected milestone
Sweetwater is Iren's largest data center site. It will be released in two phases. Sweetwater 1 will be 1.4 gigawatts, while Sweetwater 2 will have 600 megawatts of capacity.
NASDAQ: IREN
Key Data Points
Sweetwater has now been prioritized for power allocation, moving it one step closer to securing the necessary energy to power the data center.
Iren also told investors that it still expects to deliver the first 300 megawatts of its Sweetwater site in the fourth quarter of 2027. Since Iren is getting between $20 million and $25 million each year from a single megawatt, the delivery of 300 megawatts can translate into $6 billion to $7.5 billion in annual recurring revenue.
Iren has more than 5.8 gigawatts in its pipeline
Iren's publicly disclosed sites come to 5.8 gigawatts once they are all constructed and energy has been secured. However, the Sweetwater press release hinted at a key advantage that investors may not be considering.
Iren's Sweetwater announcement wasn't just about Sweetwater. The company said that "additional large-scale projects within [its] broader development pipeline" are in the works. That means when these projects are announced to the public, they will be far along the path to secured energy.
Iren only publicly discloses a project "following the execution of the relevant grid connection agreements." It's all speculation to guess the exact number of gigawatts Iren has in its pipeline that are in the developmental phase, but there are some important details to consider.
First, Iren doesn't often add small sites to its portfolio. When Iren had a publicly disclosed 2.9-gigawatt portfolio, it added a 1.6-gigawatt site in Oklahoma. The announcement of a new site can quickly change the numbers and potentially put Iren's pipeline above 7 gigawatts.
Second, some of these developmental sites are enormous. Iren doesn't disclose its developmental pipeline, but New Era Energy & Digital (NUAI -8.49%) has an option on a 7-gigawatt New Mexico site in development, which makes up a large part of that stock's bullish thesis. If Iren had a site like that, it wouldn't disclose it until securing relevant grid connection agreements.
Furthermore, Hut 8 (HUT -5.55%) includes 5.4 gigawatts of developmental sites in its 9.37-gigawatt portfolio. Iren would not list those 5.4 gigawatts or the 1.88 gigawatts that Hut 8 lists as "Energy Capacity Under Exclusivity." If Hut 8 operated in the same way as Iren, we wouldn't know about more than 7 gigawatts that are in its pipeline.
Iren is hiding multiple gigawatts from investors
The way New Era Energy & Digital and Hut 8 report gigawatts indicates that Iren may have multiple gigawatts that remain undisclosed.
The two important questions are how many extra gigawatts Iren controls and how long it will take to complete and energize sites.
Those sites are highly valuable, even before they are delivered to customers. Nvidia Chief Executive Officer Jensen Huang said that a 1-gigawatt AI data center costs $50 billion to $60 billion to build. That's the type of value Iren commands once it completes its sites, and Iren is tapping into customer prepayments and debt to fund its capital expenditures.
Its profit margin should scale rapidly once it's delivering more compute, and there is likely more to Iren's portfolio than the 5.8 gigawatts it has publicized.
