Mark Cuban recently offered a warning about how the artificial intelligence (AI) boom is being paid for. In a recent post on X, Cuban called Nvidia (NVDA) the sector's initial public offering (IPO), "funding everyone and anyone." His point was that Nvidia is now bankrolling a long list of AI companies, working similarly to how stock listings once funded young internet firms during the dot-com era. Few companies fit that description better than IREN (IREN).
Nvidia is backing IREN in two ways. First, it holds a five-year right to buy up to 30 million IREN shares at $70 apiece. That would be an investment worth up to $2.1 billion if it goes ahead.
Second, there is a separate $3.4 billion cloud deal, where IREN supplies Nvidia with GPU computing power over five years. That contract alone gives IREN a revenue floor of roughly $680 million a year. A $20 Billion Reason Why Intel Stock Is in Focus Dear Intel Stock Fans, Mark Your Calendars for August 12 Ahead of Nebius Earnings, Here's What Barchart Data Says Comes Next for NBIS Stock Get exclusive insights with the FREE Barchart Brief newsletter.
Subscribe now for quick, incisive midday market analysis you won't find anywhere else. To put that into perspective, the company's revenue has fallen more than 20% sequentially in the last two quarters, with IREN reporting $144.8 million in revenue in its most recent quarter. So, a contract that brings well over half a billion dollars for the next five years is significant for a company of this size.
The problem is paying for the data centers behind these deals. During the last quarter, IREN spent roughly $1.36 billion on hardware, property, and equipment, which is more than nine times the revenue it brought in. That gap is the whole issue.
IREN is spending far more on building out data centers than it currently earns. It has been filling the difference with outside money, including an equity raise of up to $6 billion to fund the expansion. Moving forward, demand looks like less of a concern for the company.
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