The IREN stock price has suffered a harsh reversal in the past few weeks, erasing some of the gains made in the past few months. IREN has crashed by 42% from its highest level this year, bringing its market cap from $21 billion to $12 billion today.
IREN Stock Price Forms a Risky Pattern
The daily timeframe chart shows that the IREN share price has slumped in the past few weeks. It has already crashed below the 50-day and 25-day Exponential Moving Averages (EMA). Moving below these levels is a sign that bears are gaining control.
Most importantly, the coin has formed a double-top pattern at ~$75 and a neckline at $48, giving it a height of $27. Subtracting the height from the neckline gives it a target price of $21, which is about 50% below the current level.
Why IREN Shares are in a Freefall
IREN is an Australian Bitcoin mining company known for its efficiency and higher margins. Like other top mining companies, it is now pivoting to the artificial intelligence industry, where it is providing data center solutions.
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IREN’s breakthrough in the industry happened recently when it inked a major deal with Microsoft, which will pay it $9.7 billion in the next five years.
The company hopes that other large companies in the AI industry will become clients. Precisely, it hopes that it will attract companies like Google, OpenAI, Anthropic, and xAI.
IREN is replicating a business model that has become popular recently. A good example of this is CoreWeave, which has become a $35 billion juggernaut in the industry.
The most recent results showed that its business was doing well, with its revenue rising to $240 million from the previous $187 million. $237 million of this revenue was from its Bitcoin mining operations, while its AI business made $7.3 million.
IREN reported a net profit of $384 million, mostly being the unrealized gain of its financial instruments such as Bitcoin
The company now hopes that its ARR in the AI industry will be $3.4 billion by the end of 2026.
IREN shares have plunged in the past few days because of the ongoing jitters about the AI bubble. Indeed, all companies in the industry have plunged. CoreWeave has dived by 62% from its all-time high. Similarly, Bitfarms stock has dived by over 60% from the year-to-date high.
Another reason is that there are concerns about the ongoing competition in the industry now that more companies are joining. The risk is that, while the computing demand is rising, clients will have more choices, which may lead to margin erosion over time.
Additionally, there are concerns about AI GPU depreciation. Top companies, including IREN, estimate that GPUs will remain useful for about 6 years but analysts warn the ongoing innovation means that the timeline will be shorter.
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