This AI Stock Just Secured a Deal That Could Change Its Trajectory Forever

Iren (NASDAQ: IREN) just landed a strategic partnership with Nvidia (NASDAQ: NVDA), which could accelerate its efforts to build data centers optimized for advanced artificial intelligence (AI) workloads. The deal gives Iren a $3.4 billion AI cloud contract over five years to run Nvidia's internal workloads. It also supports Iren's plans to deploy up to 5 gigawatts of data center capacity powered by Nvidia hardware.

For a business transitioning from Bitcoin mining to a leading AI cloud infrastructure provider, this deal validates that opportunity and could change Iren's growth trajectory forever.

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Nvidia has incentive to help Iren win

Iren is tackling key constraints in AI's physical infrastructure. As co-CEO Daniel Roberts said, "Power, land, data center construction -- the pieces that cause delays for others are the pieces we own and control."

These assets become increasingly valuable in a compute-constrained world. Goldman Sachs estimates there will be a 45-gigawatt power shortfall for U.S. data centers by 2028, requiring 72 gigawatts of new capacity through 2030.

This power shortage could lead to higher contract prices for Iren, which owns grid-connected power ready to energize new data centers as they are completed. Goldman Sachs estimates the cost to build new AI data centers at $15 million to $20 million per megawatt, which implies a substantial sum for Iren's 5-gigawatt power portfolio.

The structure of the Nvidia deal enhances Iren's ability to meet this shortfall. Nvidia secured a five-year option to invest up to $2.1 billion in Iren at $70 per share. The catch is that the investment is tied to execution. The option is only exercisable as Iren deploys graphics processing units in its data centers. This gives Nvidia, the leading AI chip supplier, a financial incentive to help Iren build its data center pipeline as quickly as possible and sign more contracts with hyperscalers.

Iren is going global

Nvidia CEO Jensen Huang made it clear in the press release why the company partnered with Iren. As Huang put it, "Iren brings the scale and infrastructure expertise to help accelerate the build-out of next-generation AI infrastructure globally."

Nvidia values Iren's speed to market. It has turned data center development into a highly efficient, repeatable process, enabling it to build across multiple sites simultaneously. It has two campuses under construction in Texas, and it has announced expansions beyond 2027 in Spain and Australia.

Iren's expertise was validated last fall with a $9.7 billion five-year AI cloud contract with Microsoft. In the first quarter, Iren increased its annualized recurring revenue under contract to $3.1 billion and raised guidance to reach $3.7 billion by the end of 2026. This revenue is based on less than 10% of its total power portfolio.

Iren has a tremendous opportunity to unlock tens of billions in revenue as it deploys Nvidia's DSX AI infrastructure and gains more contracts. The Nvidia partnership validates Iren's ability to make it happen.

John Ballard has positions in Bitcoin, Iren, and Nvidia. The Motley Fool has positions in and recommends Bitcoin, Goldman Sachs Group, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.