After covering neocloud stocks for more than a year, I decided to sell Cipher Digital (CIFR -1.62%) shares to buy more Iren (IREN -2.11%). Both data-center companies are well-positioned as hyperscalers demand more compute for their AI ambitions, but Iren has become far more compelling in recent months, especially with a bearish undertone still gripping the narrative.
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Some megawatts are more valuable than others
Iren's first landmark deal was a five-year, $9.7 billion pact with Microsoft for 200 megawatts. Investors waited for several months for Iren to make another splashy deal of that magnitude, but it has mostly pulled together a few smaller deals instead, including one with Nvidia.
NASDAQ: CIFR
Key Data Points
Cipher Digital has a bunch of higher-profile deals, including a 15-year, $5.5 billion deal with Amazon centering around 300 megawatts.
Both deals came last year, when the value of a megawatt was much lower than it is today. These two deals show that Iren commands a higher annual contract value per megawatt than Cipher Digital. The Iren deal comes to $1.94 billion per year, while the Cipher Digital deal only reaches $367 million per year.
The gap is pretty easy to explain. Cipher Digital builds data centers but requires customers to bring their own chips. Iren includes Nvidia chips, its own cloud platform, and additional hardware. What Iren does is more complicated than Cipher Digital's business model, which results in higher megawatt values.
Iren's capital-intensive weakness may not persist for long
Cipher Digital has a less risky business model than Iren, which is part of why it gets attention. Because the company has tenants bring their own chips, Cipher Digital doesn't require as much capital per data center. Furthermore, Cipher Digital doesn't have to worry if Nvidia releases a new GPU that outdates the GPUs in its data centers.
NASDAQ: IREN
Key Data Points
Iren spends more capital for each of its data centers, which has fueled shareholder dilution concerns. It's a legitimate worry since the company announced an at-the-market equity program of as much as $6 billion earlier this year. Iren doesn't have to tap into these shares but has given itself the option to do so.
Dilution is the biggest concern for Iren investors, but that risk may subside soon. From November 2025 to the end of August, megawatt prices for three-year deals soared by 125%, and five-year contract values are up by 70%.
That's a big deal for Iren's finances, since the company receives large prepayments from its customers. The more valuable megawatts become, the higher the prepayments. Recent customer prepayments are already funding 45%-55% of GPU capital expenditures, and that figure may rise over time, especially as Iren looks into more lucrative, shorter-duration contracts.
Rising megawatt values also benefit Cipher Digital, but not to the same degree that they help Iren. For instance, fellow co-location company TeraWulf entered a 20-year, $19 billion deal with Anthropic for 401 megawatts of critical IT load. That comes to an annual value of $950 million per megawatt.
TeraWulf operates a business model similar to Cipher Digital's, while Iren comfortably cruises past both on a per-megawatt basis. As Iren lands more deals and brings more power online, it can eventually tap into its rising annual recurring revenue to cover most of its costs.
Iren has the best gigawatt pipeline
Iren has a 5.8-gigawatt pipeline. That's more than Cipher Digital and Nebius, with the latter being Iren's heavily touted neocloud competitor. Nebius expects a 5-gigawatt pipeline by the end of the year, while Cipher Digital has a 5.3-gigawatt pipeline.
Here's why those numbers matter. Iren has a deeper pipeline and is bringing more capacity online than Cipher Digital. While Cipher Digital intends to bring 270 megawatts online in 2027, Iren believes it can put 500 additional megawatts online in 2027. Megawatts closer to going online command higher contract values than those still several years away from completion. Those position Iren well for continued demand in artificial intelligence.
That sizable, immediate gap, plus the fact that Iren commands higher annual contract values than Cipher Digital, explains why I sold Cipher Digital shares and bought more of Iren. The capital-intensive nature of Iren's business may scare away some investors. Still, rising megawatt values, the delivery of more capacity, and higher prepayments suggest those problems can fade into the background soon.
