Dr Phil Investments

Reflecting on $IREN Over the last couple of days I spoke with multiple people in close contact with $IREN's management team, including investors who attended the RAISE Summit this week. Given the insights I've gathered, I think it's an appropriate time to reflect on $IREN and share my latest thoughts. It's no secret that $IREN has been somewhat slow on the commercial side, at least relative to the likes of $NBIS and $CRWV. I for one thought we'd have seen a Sweetwater deal by now, let alone substantial parts of the remaining Childress capacity pre-contracted. So what's stopping $IREN from signing these multi-hundred MW deals? In short, nothing is really "stopping" them. It comes down more to a few factors shaping their decision to hold off where other cloud providers perhaps wouldn't. Based on management's comments both on and off camera, I can confidently say demand truly isn't the issue. Cloud capacity in this market is sparse and supply can't keep up. In fact, I've heard $IREN could easily sell out 100% of its 2027 capacity today if it wanted to. The catch is that selling capacity which won't come online for another 6, 9, or 12 months yields significantly less than capacity arriving sooner. Customers want capacity today, and they're willing to pay a substantial premium for it. So while selling far into the future might prop up the stock, commercially it may not be the most prudent strategy in this environment. That dynamic can obviously shift over time, but given how far supply sits behind demand, it won't change overnight, and as it stands, holding off as long as possible yields better long-term returns. Not only do returns shrink the further out you pre-contract, but the available buyer pool shrinks with it. Selling capacity well into the future means gatekeeping much of the smaller, higher-margin clientele while mostly attracting the lower-paying hyperscalers. As we know, $IREN is increasingly moving up the stack, effectively cutting out the middle-man that hyperscalers represent, as evident in their recent Mirantis acquisition. On that note, $IREN apparently has multiple LOIs and customer commitments for high-margin managed cloud services set to take effect once the Mirantis deal closes over the coming weeks. I've now also heard several times that $IREN takes customer selection and contract structure extremely seriously. Creditworthiness matters, but management also wants clients that can scale their compute demand substantially as $IREN ramps capacity. The only near-term downside is that this due diligence takes time, yet the longer-term advantages of the approach are obvious. Beyond contract timing and customer selection, I believe some of it also comes down to operational reasons. We know the 1.4 GW Sweetwater campus is earmarked for the upcoming VR200 (Rubin) capacity, whose supply won't ramp until late this year into early next. That partly explains why the site isn't up and running already, since all they could lease out right now would be current Blackwell generation. The flip side is that $IREN could simply build "Horizon-style" capacity at Sweetwater, the same style they're currently developing at Childress, since those facilities are fully capable of housing next-gen Rubins, and have them ready by early next year, right as NVIDIA fully ramps Rubin production. And while $IREN is already doing foundation work at Sweetwater, it could still easily take another 3-4 quarters before we see operational capacity there. So what's the holdup? I believe a major reason for the slow ramp at Sweetwater is that they want to implement lessons learned from their Horizon build-outs at Childress, making the Sweetwater process more efficient, less costly, and thus more economical. Here I want to give a big shoutout to my friend @FransBakker9812, who found that $IREN has recently developed proprietary methods to make elements of the construction process significantly more streamlined, saving time and cost across all future liquid-cooled builds. He shared more specifics on that with his "Research” and “Founding” subscription tiers, which I recommend checking out. I firmly believe what some might see as a relatively slow ramp, given $IREN's starting position, is management's way of doing things right. Start with the first liquid-cooled buildouts in Horizons 1-4, implement lessons from one Horizon batch to the next, then apply the full set of process and workflow improvements at Sweetwater. This closely mirrors what $IREN has always done since its mining era, when it started small and progressively scaled its construction operations in both size and speed. A true construction flywheel. Interestingly, I've just heard that $IREN plans to develop Sweetwater 1, Sweetwater 2, and the 1.6 GW Oklahoma site in parallel over the coming years. That shows just how exponential their construction ramp really is. In short, I believe holding out on the next wave of contracts comes down to a few factors: 1) Signing well ahead of commissioning means giving up pricing upside and attracting only a small subset of clients. 2) Customer selection and contract structure are a big part of $IREN's long-term strategy. It takes more time than simply selling to the highest bidder, but should build stronger customer relationships over the long run. 3) Scaling construction in a controlled manner, carrying critical lessons from current builds into the next. Slow start, exponential growth curve. None of this means we won't see any deals this year, but it does add color on why commercial progress on closing deals has been slower than many of us expected. As for deal activity and my current expectations there, it helps to step back and consider how $IREN's near-term capacity is structured. We should expect the 50k B300 units $IREN procured back in March to be fully contracted and installed by year-end, roughly 33k at Mackenzie and another ~17k at Childress. Apparently first deliveries for Mackenzie have already arrived and are being installed. Given this progress, I'd expect $IREN to announce having contracted substantial parts of these air-cooled Blackwells by August earnings at the latest. This is the low-hanging fruit. And worth noting, since $IREN first gave ARR guidance for that capacity, GPU rates across the board have moved up substantially. If they sign anything close to what they landed with the 60 MW NVIDIA deal, their year-end guidance of $3.7B should climb to at least $3.9-$4.1B. Beyond this, there's plenty of 2027 capacity that could get contracted later this year, including 190 MW of air-cooled capacity at Childress, 30 MW at Canal Flats, 150 MW of liquid-cooled Horizon 5-6, and 300 MW of liquid-cooled capacity at Sweetwater 1. We don't have guidance on when this capacity comes online next year or what the ramp schedule looks like, but since liquid-cooled greenfield development takes longer than retrofitting existing air-cooled buildings (currently mining BTC), I'd expect the remaining 220 MW of air-cooled capacity to come online within the first couple of quarters of 2027. For that reason, I think the odds those few hundred MW get pre-contracted later this year are relatively high. The trickier part is the 150 MW of Horizons 5-6 and the 300 MW of liquid-cooled Sweetwater capacity. I think there's a decent shot at least one of the two gets pre-contracted in 2026, especially if it's for a hyperscaler or a frontier lab, which are far more inclined to sign a few quarters ahead. Either way, it's just a matter of time until contracts start flowing. It's clear to me that $IREN is playing the long game and isn't compromising long-term upside for short-term euphoria in the share price. As a long-term investor, I fully support that. I do wish, however, that $IREN were a bit more open about strategy and roadmap. It's obvious they're holding their cards close to the chest, but I find management has been overly vague on strategy. It takes investors like me piecing the puzzle together to make sense of how $IREN plans to scale into the next hyperscaler. Ironically, management does share a fair bit of interesting and useful information if you get the chance to meet them in person, yet on earnings calls they come across as overly reserved. That said, the future looks bright, and I have no reason to get overly concerned about disappointing price action. With a bit of luck we're in for a string of positive catalysts, starting with the Horizon 1 handoff in a couple of weeks. I also want to take a moment to thank @OMCapitalGroup, who did an excellent job gathering information and insights while attending RAISE this week. If it weren't for his work, I wouldn't be nearly as informed, so big props to him for taking the time to travel all the way to Paris for $IREN due diligence and then going out of his way to keep me updated with everything he picked up, even putting some of my own questions to management directly. He's relatively new to X, but he told me he's going to start posting shortly and jump into Frans' spaces more often. Do me a favor and give this fella a follow. Have a good one, cheers! ✌️ Thumbnail Credit (enhanced version): @AndyDTrades