IREN Limited (NASDAQ: IREN) shares fell nearly 4% to $29.23 in early Friday trading after Morningstar reduced its valuation estimate for the AI cloud provider to $37 from $43. The analyst cited concerns over rising borrowing costs and increased competition for capital.
Morningstar warned that specialized AI cloud providers, known as neoclouds, could face higher financing costs as large technology companies expand their own infrastructure. The analyst estimated that total cloud infrastructure investment could exceed $1.3 trillion in 2027, intensifying competition for funding.
The downgrade follows a sharp decline in IREN shares. The stock touched a 52-week low of $26.60 on Thursday before recovering to close at $30.39. Shares had fallen 26.4% from their October 6 close of $41.28 through Thursday.
Capital Commitments and Financing Exposure
IREN reported $13.81 billion in capital commitments as of June 30, largely tied to AI hardware purchases and data-center development. The company guided to $25 billion–$30 billion in capital expenditures for fiscal 2027, with approximately $8 billion expected to come from GPU financing and customer prepayments.
In its annual filing, IREN disclosed that it may commit to GPU purchases and begin data-center development before securing financing for those investments. The company noted that future funding arrangements depend on market conditions with no assurance about their availability or terms.
As of August, IREN reported approximately $14 billion in combined cash, committed GPU financing, and customer prepayments. However, the company's June 30 cash balance included $1.7 billion in restricted cash unavailable for unrestricted use.
IREN stated that its existing cash, expected operating cash flows, and financing proceeds should cover obligations coming due for at least 12 months from its June 30 financial statements. Its larger fiscal 2027 expansion plan remains dependent on additional financing sources exposed to tighter credit conditions.
