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Culper Research recently published a report, accusing Iris Energy of insufficient capacity for AI and HPC at its Childress site.
Iris Energy Ltd (NASDAQ: IREN) saw its shares drop 13% on Thursday after a Culper Research report questioned the suitability of its Childress, Texas site for artificial intelligence (AI) or high-performance computing (HPC). However, asset management firm Bernstein supports the company for its commitment to bitcoin mining at the location.
Analysts at Bernstein stated that Iris Energy has not claimed any plan to set up its Childress mining site for AI purposes. They clarified that the current infrastructure is well-suited for its primary motive of bitcoin mining.
Notably, the Childress site has a direct connection to the ERCOT electricity grid through a 345kV transmission link situated on Iris’ 420-acre freehold property. This connection can supply 600MW of electricity to the site.
Bernstein’s report estimates that 65% of Iris Energy’s value stems from Bitcoin mining, with the remaining 35% attributed to AI and HPC. The brokerage firm strongly dismissed Culper Research’s statement that Iris Energy’s mining activities are valueless.
Notably, the company’s primary AI upside largely ties to its 1.4 gigawatt West Texas site, which boasts 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 correct.
The valuation of Iris Energy aligns with other bitcoin miners such as CleanSpark Inc (NASDAQ: CLSK) and Marathon Digital Holdings Inc (NASDAQ: MARA), which derive their entire valuation from mining activities. This comparison further supports the legitimacy of Iris Energy’s business model, despite the criticisms from Culper Research.
Culper Research’s Allegations
Interestingly, Culper Research recently published a report, accusing Iris Energy of insufficient capacity for AI and HPC at its Childress site. It alleged that the company’s executives, including Co-CEOs Daniel and Will Roberts, began selling their shares starting in February 2024, suggesting a lack of confidence in the company’s future.
Amid these allegations, Bernstein started its analysis on Iris Energy last week. While 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 it had mined 233 BTC in June, a slight increase from the 230 BTC mined in May. It is on schedule to achieve a hashrate of 20 EH/s in the third quarter and aims to reach 30 EH/s in the fourth quarter. Additionally, Iris disclosed that its new-generation S21 Pro miners are set to begin shipping this month.
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