This Growth Stock Faces Short-Term Volatility, but Its Artificial Intelligence Story Remains Intact

Iren(NASDAQ: Iren) has been one of the most volatile artificial intelligence (AI) stocks of the year. The stock had multiple 10%+ price swings in both directions over the past few days as its earnings date approaches.

The AI data center provider reports earnings on Feb. 5, where some investors speculate it will announce another lucrative deal with a hyperscaler. However, not every investor is waiting for earnings to come out. The stock is already up by more than 20% year to date as investor enthusiasm builds.

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The gigawatt demand is massive

Iren’s potential customers are big tech companies that need multiple gigawatts of power to fuel their AI ambitions. Meta Platforms(NASDAQ: META) stated in its Meta Compute plan that it aims to deploy hundreds of gigawatts of AI power over the coming decades. Microsoft(NASDAQ: MSFT) has a similar vision and touted AI as the next industrial revolution.

Iren is one of the few companies that provides AI data centers and sufficient gigawatts of power. It has a 3-gigawatt pipeline, and its Sweetwater 1 project will be energized in April. That project has 1.4 gigawatts, putting it firmly ahead of fellow AI data center providers.

Iren’s data centers stand out from traditional data centers. AI data centers are specifically designed to handle AI workloads, while traditional data centers handle a range of tasks, such as web hosting and data storage.

Iren’s Microsoft deal demonstrates credibility

Although investors are speculating that Iren may announce another big deal in February, the company has already proven itself in the industry. Its five-year deal with Microsoft for $9.7 billion included a 20% prepayment, which will help fund capital expenditures.

The deal covers 200 megawatts, which represents a small slice of Iren’s 3 gigawatts. As more of Iren’s energy goes online, the deals should flow. Iren told investors in its Q1 FY 2026 earnings presentation that it was targeting $3.4 billion in annual recurring revenue by the end of 2026.

As the AI industry becomes more competitive, tech firms may express more interest in working with Iren and securing additional energy. If demand continues to heat up, Iren may be able to raise its prices.

Tech giants are increasing their AI expenditures

A central part of Iren’s investment thesis is big tech companies eagerly throwing money at AI. This part of the thesis remained intact after Meta Platforms and Microsoft reported earnings. Facebook’s parent company increased AI capital expenditures by 73% year over year in Q4 while guiding for higher 2026 capital expenditures than expected. Microsoft also spent more than expected, with capital expenditures up by 66% year over year in Q2 FY 2026.

Higher AI spending bodes well for Iren and other key players that are solving different parts of the AI bottleneck. Despite Iren’s volatility, the core thesis stands as the company’s earnings date approaches.

Marc Guberti has positions in Iren. The Motley Fool has positions in and recommends Meta Platforms and Microsoft. The Motley Fool has a disclosure policy.