Financial research firm Bernstein is pushing back against a scathing short report from Culper Research on Iris Energy (IREN), a company focused on bitcoin mining and artificial intelligence (AI) data centers.
IREN’s Stock Drops on Short Seller Criticism
IREN’s stock price plunged over 13% following Culper’s report, which argued that the company’s shares were significantly overpriced and its bitcoin mining operations were essentially worthless. Culper specifically criticized IREN’s Childress, Texas facility, claiming it was unsuitable for AI operations.
Bernstein Analysts Disagree with Culper’s Assessment
Bernstein analysts Gautam Chhugani and Mahika Sapra countered that Culper’s critique missed the mark. They pointed out that IREN’s Childress site is primarily for bitcoin mining, where the existing infrastructure is perfectly suited. Bitcoin mining, according to Bernstein, makes up 65% of their fair value estimate for IREN, with AI/HPC accounting for the remaining 35%.
Bernstein Bullish on IREN’s AI Potential
Chhugani and Sapra believe IREN’s larger 1.4GW pipeline site in West Texas holds the real potential for AI. This undeveloped site allows IREN to design a data center specifically built for AI needs, including features like liquid cooling and higher rack density.
Response to Other Culper Criticisms
Bernstein addressed other points raised by Culper, including the cost per megawatt (MW) for building data centers. They argue that the lower cost of IREN’s Childress facility reflects its focus on bitcoin mining, not AI. When building the West Texas site for AI, IREN is expected to incorporate the necessary features at a higher cost per MW.
Bernstein Positive on Bitcoin’s Future
The report also highlights Bernstein’s bullish outlook on bitcoin’s price, expecting it to reach new highs by the end of 2024 and hit $200,000 by 2025. This positive outlook on bitcoin directly impacts their valuation of IREN’s mining operations.
Also Read: Will Bitcoin Crash Before Halving? Experts Say 20% Dip Possible, But Bullish on $1 Million Long Term
Block-Core Scientific Deal Estimated at $300 Million
In a separate note, Bernstein analysts weighed in on the recent deal between Block (formerly Square) and Core Scientific, another company pursuing a hybrid bitcoin mining and AI data center strategy. They estimated the value of Block’s agreement to supply Core Scientific with new mining chips to be around $300 million, potentially disrupting the Chinese-dominated chip manufacturing landscape.
Bernstein’s Long Positions in Crypto
It’s important to note that analyst Gautam Chhugani holds long positions in various cryptocurrencies, potentially influencing his perspective on IREN and the bitcoin market.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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