Why This Emerging AI Data Center Stock Could Outpace Traditional Market Leaders

The Microsoft Deal Changes Everything for Iren

Iren (NASDAQ: IREN), an AI-focused data center operator, recently secured a transformative five-year contract with Microsoft (NASDAQ: MSFT) that fundamentally shifts the company’s growth trajectory. Under this agreement, Iren will supply 200 megawatts of power capacity valued at $9.7 billion, translating to approximately $2 billion annually. More importantly, Iren negotiated a 20% prepayment clause that provides substantial capital for expansion while reducing reliance on debt financing.

This single deal positions Iren to demonstrate what true scaling looks like in the AI infrastructure space. With roughly 3 gigawatts of power already in its pipeline, the company has the foundation to replicate this Microsoft model at least 14 additional times. If executed as planned, Iren could be generating $20 billion in annual recurring revenue within five to ten years—a trajectory that fundamentally redefines its long-term value proposition.

Accelerating from Millions to Billions in Annual Recurring Revenue

The growth math underlying Iren’s opportunity is striking. In fiscal 2024, the company generated just $3.1 million in AI cloud revenue, which expanded to $16.4 million by fiscal 2025. Management initially guided toward $200-250 million in annual recurring revenue by December 2025, but the Microsoft contract has already accelerated this timeline significantly.

Current guidance places Iren at $3.4 billion in annual recurring revenue by the end of 2026. This represents a monumental leap from the low-millions level just 12 months ago. The inflection point is clear: the company has moved from proof-of-concept phase into execution mode, with contracted revenue providing visibility that most growth stocks can only dream about.

Comparing Growth Rates: Iren’s Velocity vs. Market Incumbents

Vertiv (NYSE: VRT) has built an enviable position as a leader in liquid cooling solutions, which remain essential infrastructure for data centers supporting AI workloads. The stock has delivered 39% returns over the past year and gained 550% over five years, solidly outperforming the S&P 500. These are respectable numbers by any measure.

However, Vertiv’s growth rate tells a different story when examined closely. Q3 delivered 29% year-over-year revenue growth, but forward guidance of 18-22% for Q4 signals a deceleration trajectory. For investors seeking exposure to the highest-velocity AI infrastructure plays, this slowdown matters significantly.

In contrast, Iren’s recently completed Microsoft contract creates a different baseline for evaluation. While Vertiv expands through organic market share gains and margin expansion, Iren is adding contracted capacity at scale. One company operates within existing market demand curves; the other is expanding the total addressable market through long-term partnerships.

Market Cap Dynamics and Return Potential

Iren carries a $12 billion market capitalization compared to Vertiv’s $67 billion valuation. This size differential creates meaningful implications for future returns. Markets require substantially less new capital deployment to move smaller-cap equities, and when combined with Iren’s contracted revenue visibility, this becomes a material advantage.

Vertiv remains a solid compounding vehicle as AI infrastructure expands and liquid cooling demand remains robust. But for investors with higher risk tolerance seeking outsized returns, the asymmetry increasingly favors the emerging player with massive contracted growth ahead and a smaller equity base to move.

The Inflection Point in AI Infrastructure Investment

The core distinction isn’t that Vertiv is deteriorating—it isn’t. Rather, Iren represents a different risk-return profile entirely. One provides steady compounding from established market position; the other offers exposure to explosive growth backed by contractual commitments from a Fortune 500 anchor customer.

The Microsoft deal essentially removed execution risk from Iren’s growth story. Management now has clarity on revenue through 2029, capital for buildout, and a template to replicate with additional enterprise partners. That shifts Iren from speculative growth narrative into contracted expansion narrative—a meaningful distinction for portfolio construction.

Consider your investment thesis carefully: Are you seeking stability from proven infrastructure leaders, or are you pursuing exposure to the next wave of AI-driven growth? The answer to that question determines whether you’re looking at Vertiv, Iren, or potentially both within a diversified AI infrastructure allocation.