IREN Soars 6.8% on AI Cloud Expansion Amid Debt-Fueled Growth Debate

Summary
• IREN surges 6.78% to $36.07, driven by a $9.7B Microsoft AI cloud contract and $3.93B in fresh funding
• Goldman Sachs initiates Neutral rating at $39, citing 'relatively full' valuation despite hypergrowth
• Leveraged ETFs IREG, IRE, IREX rally 13–14%, amplifying IREN's volatility

IREN's dramatic intraday rally reflects a pivotal inflection point for the AI cloud miner. With a $9.7B Microsoft deal and $3.93B in convertible debt/equity funding, the stock has surged 6.78% to $36.07, trading near its 52-week low of $5.125. The move coincides with Goldman Sachs' cautious Neutral rating and a sector-wide surge in leveraged ETFs, signaling both optimism and skepticism about IREN's capital-intensive AI expansion.

Microsoft AI Cloud Contract Fuels Optimism, Debt Raises Red Flags
IREN's 6.78% rally stems from its $9.7B Microsoft AI cloud contract, which includes $5.8B for 76,000 GB300 GPUs and $3B in data center CAPEX. The stock's surge follows a $2.3B convertible note issuance and $1.63B equity offering in December 2025, which refinanced older debt and funded GPU expansion. While the Microsoft deal validates IREN's AI cloud pivot, analysts highlight risks: the $3.93B capital raise includes 23.1% dilution and $2.07B earmarked for general corporate purposes, raising concerns about balance sheet strain and cash flow sustainability. Goldman Sachs' $39 price target reflects these tensions, balancing growth potential against valuation concerns.

Data Processing Sector Mixed as Microsoft Gains 1.76%
IREN's 6.78% gain outperformed Microsoft's 1.76% rise, highlighting divergent investor sentiment. While Microsoft's modest rally reflects broader AI sector optimism, IREN's volatility underscores its role as a speculative play on AI cloud infrastructure. The data processing sector remains fragmented, with leveraged ETFs like IREG (13.7%) and IREX (13.4%) amplifying IREN's momentum. However, IREN's 7.7x forward EBITDA multiple lags Microsoft's 28x, suggesting skepticism about IREN's ability to monetize its GPU fleet and Microsoft contract.

Options Playbook: Capitalizing on IREN's Volatility with IREG and IREN20251226C36
• 200-day average: 25.68 (far below current price)
• RSI: 27.91 (oversold)
• MACD: -4.19 (bearish), Signal Line: -3.296 (bearish)
• Bollinger Bands: Price at $36.07 (near lower band of $34.98)

IREN's technicals suggest a short-term bounce after hitting oversold territory, but structural bearishness persists. The 200-day average at $25.68 and Bollinger Bands indicate a potential rebound to $34.98–$52.57. Leveraged ETF IREG (13.7% gain) offers amplified exposure to IREN's volatility, but its 11.21% leverage ratio demands caution. For options, IREN20251226C36 and IREN20251226C37 stand out:

• IREN20251226C36 (Call, $36 strike, 12/26 expiry):
- IV: 91.23% (high volatility)
- Delta: 0.522 (moderate sensitivity)
- Theta: -0.191 (rapid time decay)
- Gamma: 0.077 (price sensitivity)
- Turnover: $173,470 (liquid)
- Leverage: 17.85% (high)
- Payoff at 5% upside ($37.87): $1.87/share
- Ideal for aggressive bulls expecting a short-term breakout above $36.925 resistance.

• IREN20251226C37 (Call, $37 strike, 12/26 expiry):
- IV: 87.49% (high volatility)
- Delta: 0.441 (moderate sensitivity)
- Theta: -0.174 (rapid time decay)
- Gamma: 0.080 (price sensitivity)
- Turnover: $212,634 (liquid)
- Leverage: 23.92% (high)
- Payoff at 5% upside ($37.87): $0.87/share
- Suits traders betting on a controlled rally to $37.50, with tighter risk management due to higher strike price.

Aggressive bulls may consider IREN20251226C36 into a break above $36.925.

Backtest IREN Stock Performance
The backtest of Invesco QQQ Trust (IREN) following a 7% intraday increase from 2022 to the present shows impressive results. The strategy achieved a 243.04% return, significantly outperforming the benchmark return of 45.28%. With an excess return of 197.76% and a CAGR of 37.16%, the strategy demonstrated robust growth potential. However, it's important to note that the strategy had a maximum drawdown of 0.00%, indicating a lack of risk management during market downturns.

IREN's AI Cloud Gamble: Watch $36.925 and Microsoft's 1.76% Move
IREN's 6.78% rally hinges on its ability to execute the Microsoft AI cloud contract while managing $3.93B in new debt. The $36.925 intraday high represents a critical resistance level; a break above this could validate the stock's AI cloud narrative. Conversely, a retest of the $34.98 Bollinger Band support would test investor confidence in IREN's capital structure. Meanwhile, Microsoft's 1.76% gain as a sector leader suggests broader AI optimism, but IREN's 7.7x forward EBITDA multiple remains a discount to peers. Watch for $36.925 breakout or a retest of $34.98, and monitor Microsoft's price action for sector sentiment cues.