Iris Energy, a bitcoin mining company, faced a 14% drop in its shares recently due to concerns raised by a short seller regarding the suitability of its Childress site in Texas for hosting artificial intelligence (AI) or high-performance computing (HPC). Despite this, brokerage firm Bernstein highlighted that Iris Energy has not expressed any intention to retrofit the site for AI purposes.
Bernstein’s research report emphasized that Iris Energy is primarily focused on expanding its bitcoin mining operations at the Childress site, as the existing power and data center infrastructure is well-suited for this purpose. The brokerage estimated that 65% of the company’s value is attributed to bitcoin mining, with the remaining 35% coming from AI/HPC activities.
While acknowledging the potential for AI development at Iris Energy’s 1.4 gigawatt West Texas site, Bernstein pointed out that the main opportunity lies in monetizing the land and power supply rather than retrofitting for AI. The brokerage also highlighted that comparing the company’s current capital expenditure metric for bitcoin mining to that of AI/HPC is not a meaningful exercise.
In terms of valuation, Bernstein compared Iris Energy to other bitcoin mining companies like CleanSpark and Marathon Digital, noting that the company’s valuation is in line with those firms where mining activities are the primary driver of value. As a result, Bernstein initiated coverage of Iris Energy with an outperform rating and set a price target of $26 per share, despite the recent share price closing at $11.20.
Overall, while concerns were raised about the suitability of Iris Energy’s Childress site for AI and HPC activities, Bernstein’s research report suggests that the company’s primary focus remains on expanding its bitcoin mining operations. The potential for AI development lies at a different site in West Texas, indicating a clear path for growth and value creation for the company in the future.
