New IREN Trade Idea After $9.7 Billion Microsoft, Nvidia News Spurs Run
Here's how I'm looking at the data center firm following a compelling announcement.
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IREN Limited (IREN) is running again on Monday morning.
Early on Monday morning, IREN announced that the firm has signed a multi-year GPU cloud services contract with Microsoft (MSFT) . Under this agreement, IREN is to provide Microsoft with access to Nvidia (NVDA) GB300 GPUs over a five-year term. The total contract value comes to roughly $9.7 billion. This includes a 20% prepayment. Separately, IREN also entered into an agreement with Dell Technologies (DELL) to purchase GPUs and ancillary equipment for about $5.8 billion.
The GPUs are expected to be deployed in multiple phases through calendar year 2026 at IREN's Childress, Texas campus in conjunction with the delivery of new liquid-cooled data centers that will support 200 MW of critical IT load. The Childress campus currently has a capacity of 750 MW. IREN will fund the necessary capex up-spend through its existing cash load, customer prepayments, operating cash flows and additional financing initiatives. The firm did just raise more than $856 million in early October through a convertible senior note offering. Those notes mature in 2031.
Who Is IREN?
IREN Limited is a Sydney, Australia based firm. Despite that, the stock is listed directly at the Nasdaq. These are not ADRs. The firm owns and operates large data centers. The facilities have been optimized for the mining of Bitcoin and now for artificial intelligence cloud services. The firm has operations throughout Australia, Canada and in the U.S. state of Texas. IREN's direct competitors would be firms like TeraWulf (WULF) and Applied Blockchain (APLD) .
Readers May Recall...
- That back in mid-September, IREN purchased $670 million worth of high-end GPUs from Nvidia and Advanced Micro Devices AMD
- In early October, IREN announced that the firm had signed a number of multi-year contracts for cloud services specifically using Nvidia GPUs designed on Blackwell architecture
IREN to Report
IREN will go to the tape with the firm's fiscal first quarter financial results on Thursday after the closing bell.
Wall Street is looking for an adjusted EPS of $0.14 on revenue of about $242 million. That would compare very well to the year-ago comp of -$0.16 on sales growth of about 345%. Interestingly, of the six sell-side analysts that I know who track this stock, all six have revised their earnings estimates for the quarter lower since the period began. In fact, over the past 60 days, consensus EPS for the quarter has dropped from $0.47 to $0.14.
The Chart
Chase this rally? Um, no. Get long ahead of earnings? Not so sure. Get long at some point because just a few months ago, I could have initiated this one as a "Stocks Under $10" name? Yeah, I think so. Let me show you why I am being a little bit chicken with this name:
See where the stock hit resistance on Monday morning? Around $75. See where the stock got stuck two weeks ago? Around $75. Double-top patterns of bearish reversal are dangerous. Relative strength is solid, but the daily MACD does not look to be "all in." I would love to buy these shares. At the 50-day SMA. Maybe lower.
Why Not...
Try a bear put spread?
- Buy the November 7 $67 puts for $5.05
- Sell the November 7 $60 puts for about $2.30
- Net debit: $2.75
Note: Basically, the trader here is risking $2.75 (max loss) to try to win back $7.00 for a profit of 155% if it works to perfection.
At the time of publication, Guilfoyle was long MSFT, NVDA and AMD equity.
