IREN stock continued its strong downward trend today, reaching its lowest level since April 13, and is 45% below its year-to-date high. This retreat will likely continue as the neocloud company faces substantial challenges.
IREN Stock Falls After Meta News, But More Risks Remain
IREN, formerly known as Iris Energy, dropped after a Bloomberg report said Meta Platforms was considering launching its own cloud computing business to sell excess capacity to other companies.
This is a major development because Meta has become one of the biggest clients of neocloud companies. It inked a $27 billion deal with Nebius and has a relationship with CoreWeave.Therefore, investors are concerned that one of IREN’s potential clients has now become a competitor.
IREN is facing more challenges. SpaceX, which recently launched its IPO, has also entered the industry. It is now receiving over $1.25 billion a month from Anthropic, $150 million from Reflection AI, and $950 million from Google.
More companies have also entered the industry, with nearly all Bitcoin mining companies launching ambitious data center projects as their core business struggles. As such, in the future, it will be at a disadvantage when negotiating deals with potential clients.
READ MORE: DRAM Stock Is Sinking: What Next for This Micron, Sandisk, Western Digital ETF?
IREN stock has also slumped because the company has not received a major order from hyperscalers this year. Its last major order came from Microsoft, which will pay it $9.7 billion. It also inked a GPU-linked deal with Nvidia earlier this year.
IREN is also facing more challenges, including the rising memory and GPU prices, which are boosting its capital expenditure. It plans to ramp up its spending using the $2.6 billion on its balance sheet, GPU financing, and equity.
These risks, together with its depreciation, explain why the company continues to attract a substantial short interest. It has a short interest of 18%, a sign that many investors expect its stock to continue falling.
IREN Share Price Technical Analysis
Technicals suggest that the IREN stock price may have more downside in the near term. It has already crashed below the key support level of $50.56, its lowest level on June 10. It also moved below the lower side of the ascending channel and the 50-day moving average.
The Relative Strength Index (RSI) has moved to the oversold level of 30. This means that it has more downside to go before it gets extremely oversold. Therefore, the stock will likely continue falling, potentially to the key psychological level of $35.
The alternative scenario is where the stock rebounds to $50 as investors buy the dip. Such a rebound will be bearish, as it will constitute a break-and-retest pattern, a common bearish continuation signal.
READ MORE: Robinhood Stock Nears First Golden Cross Since 2023 as Wall Street Turns Bullish
