Key Points
- Iris Energy’s shares dropped by 13% following criticism from Culper Research, but Bernstein defended the company.
- Bernstein’s analysis supports Iris Energy’s commitment to Bitcoin mining at its Childress, Texas site.
Iris Energy Ltd experienced a 13% drop in its shares after a critical report from Culper Research. The report questioned the suitability of Iris Energy’s site in Childress, Texas for artificial intelligence (AI) or high-performance computing (HPC). Despite this, Bernstein, an asset management firm, defended Iris Energy’s commitment to Bitcoin mining at the location.
Bernstein’s Defense
Bernstein analysts clarified that Iris Energy has not made any plans to use its Childress mining site for AI. They explained that the current infrastructure is well-equipped for Bitcoin mining, which is the site’s primary purpose.
The Childress site has a direct connection to the ERCOT electricity grid through a 345kV transmission link located on Iris’ 420-acre freehold property. This connection can supply 600MW of electricity to the site.
According to Bernstein’s report, 65% of Iris Energy’s value comes from Bitcoin mining, with the remaining 35% attributed to AI and HPC. The brokerage firm strongly dismissed Culper Research’s assertion that Iris Energy’s mining activities are worthless.
The company’s primary AI upside is largely linked to its 1.4 gigawatt West Texas site, which has a power interconnect. Bernstein believes that comparing Iris Energy’s $1 million per megawatt capital expenditure for Bitcoin mining to AI/HPC capex is not accurate.
The valuation of Iris Energy is in line with other Bitcoin miners like CleanSpark Inc and Marathon Digital Holdings Inc, which get their entire valuation from mining activities. This comparison further validates Iris Energy’s business model, despite Culper Research’s criticisms.
Culper Research’s Allegations
Culper Research recently published a report accusing Iris Energy of having insufficient capacity for AI and HPC at its Childress site. It alleged that the company’s executives, including Co-CEOs Daniel and Will Roberts, started selling their shares in February 2024, suggesting a lack of faith in the company’s future.
In light of these allegations, Bernstein began its analysis on Iris Energy last week. Although IREN closed its daily candle at $11.20 on Thursday, the analysts set a $26 price target for the stock. The weekly candle of the stock is 25% down, indicating a good buying opportunity.
Last week, the mining company announced that it had mined 233 BTC in June, a slight increase from the 230 BTC mined in May. The company is on track to achieve a hashrate of 20 EH/s in the third quarter and aims to reach 30 EH/s in the fourth quarter. Iris also revealed that its new-generation S21 Pro miners are set to begin shipping this month.