As-salamu alaykum everyone, I hope you are doing well. Iris Energy is a stock that I've spoken about numerous times on this channel and recently it has taken a beating in the markets so I did want to address why this is and you know whether or not I still think it is a good buy. Congrats to all those who have followed my advice with regards to taking profits and let's talk about why we find ourselves below $7 today after the stock was basically at or peaked at above $15 July 5th so only about a month ago and we lost you know close to 50% of the value so what is going on here? With coin miners you really have to keep your tap that and sink shoes on this is really the bitcoin mining aspect of it is really a trade it's not a long-term investment so let's talk about the immediate the immediate thing that investors have their sights on and that is this company's July 2024 mining update and I'm not going to pull any punches here this was a bad update not only for what they did include in the update but what they didn't include namely they didn't include any plans to address the things that were severely negative here but they also didn't include anything about where their cash position is where they're at the market is in terms of you know how much dilution is left here they didn't they the company should not have any debt they didn't say anything about whether or not they added any more debt so that was bad now if we look at see here okay so they mentioned okay 222 bitcoin mined in July and if you can if you compare that to what was mined in June and what was mined in May it was slightly below those numbers not a big deal not too much below by the way June and May we're talking post having here so having is not it's not a factor so we are comparing you know apples and apples the average operating cash rate that was down also not really a cause for deep concern because of the reasons for the operating cash rate being down so there's two reasons why the operating hash rate was down in July number one they had scheduled downtime because of upgrades that they're doing and number two they had a defective batch of miners that they are working with the source supplier on fixing nothing to really cause that big of a concern the mining revenue was down obviously the price of bitcoin was down also the number of bitcoin was down slightly as we mentioned what was really terrible in this update was the electricity cost per bitcoin so they mentioned the revenue per bitcoin you'll see in July of 24 was 61 306 the electricity cost per bitcoin was 61 677 so they actually lost money on gross so the gross margin was negative so that's before taking into account the overhead of you know administrative costs rent paying employees that's just bitcoin mine versus electricity it cost to mine that bitcoin if you compare that with June and May June was 39 000 per bitcoin May was 35 000 per bitcoin so it jumped substantially to 61 000 in July now the reason for this jump is when they're in Texas the demand for electricity shot up in July because of the weather and the the costs per unit for their mining operation in Childress went up basically almost to twice what it was a month before so what I wanted to see in this update was some talk about concrete steps to address this moving forward I know that weather is going to get cooler it's not going to remain this hot and I know that you know we are expecting the price of bitcoin to go up again so price should go up this whole revenue should go up cost should go down we should get back into you know positive margin like we were in June and May in June gross margin was 41 percent in May it was 46 or what they're calling hardware profit margin but I wanted to see some more proactive steps from management to address this electricity cost issue what they did give was some pretty pretty vague without details steps that they were taking we'll talk about them in a second now the silver lining in this update and the reason why I have Iris Energy still is because of their AI cloud services business and their access to energy which is quite substantial so their AI cloud services business revenue was 1.2 million electricity cost was 19 000 their hardware profit margin is what 98 so 98 for the AI cloud services business negative 1 for their bitcoin mining business so they have a really great business in their AI cloud services they have a stinky business in their bitcoin mining business and typically bitcoin mining honestly as a business kind of stinks if bitcoin is going sideways if it's going down it stinks it's not a great business to be in in terms of profitability if bitcoin is shooting up then this is the one time where it's actually a good business to be in and that's why these bitcoin miners are really trades they're not long-term investments unless of course they have robust AI cloud services businesses which are extremely good businesses and so if I'm the management of Iris Energy I'm looking at this and I'm saying wait a second why the heck are we investing so much into bitcoin mining when AI cloud services is a much better business it's a much easier business it's a much more stable business we control our own destiny we're not necessarily beholden to the price of bitcoin every given day or and week and month and you know things happen brokerages go down hacks happen certain sovereign governments are selling their bitcoin and there's so much volatility there with AI cloud services this is part of a secular trend that's going to last for years to come let's invest more here and I think this is the logical pivot that perhaps has already started with Iris Energy but I expect to see more of it in the near future wherein in new investment is basically focused on this AI cloud services business which makes way more sense by the way one thing I noticed was the four AI cloud services 816 nvidia h100 gpus that number hasn't changed I'd like to see that number start to increase I understand there's a lot of demand for nvidia gpus but let's let's see this number increase and really the company should be doubling down on their cloud services and AI investments and I think it will I mean it just it's an obvious opportunity for the company so for the July operations average operating hash rate was impacted by planned outages for upgrades so I mentioned that t21 minor performance due to a batch production issue so they got a bad batch of minors bitmain is in the in the process so bitmain is the source company they're in the process of replacing old effective units so this should be an aberration not something that's you know consistent month to month increased electricity costs in July were primarily attributable to higher energy pricing in the summer months at Childress in Texas but with much lower than expected energy market volatility so they had less energy trading opportunities the company so this is the sort of ambiguous statement that they gave that I wanted to see more details about more confidence from the company with regards to how are they going to solve this gross margin issue that they have for their bitcoin mining operation the company is reassessing its future energy pricing structures okay tell me more please now positive news current fleet efficiency of 24 joules per terahash is expected to improve to 17 joules per terahash so the amount of energy that is needed per terahash of mining power should go down so lower joules per terahash is what we want so going from 24 to 17 that's a big step up in efficiency and they're expecting this by the end of next month as part of their expansion to 20 exahash so okay here we have some we we have a path forward to profitability for their bitcoin mining even if we were to set aside the anticipated increase in the bitcoin's price and the decrease in electricity so for people for investors who are you know panicked about the future of the company I would say first of all July was probably somewhat of an aberration in terms of the price of bitcoin versus the price of electricity and it is not representative of what we expect the efficiency of the mining of iris energy to be so we expect the efficiency to go up for their mining operation we expect the price of bitcoin to go up we expect the price of electricity to go down as we exit the peak summer months so that should give us better updates mining updates for future months and they are saying that the 2024 expansion is on schedule that being said it's kind of making me nervous that they have 10.5 exahash installed as of august 5th 2024 and they're expecting to get to 20 exahash by the end of next month so there's a lot of exahash that needs to be installed between now and the end of next month and that's not a lot of time but they're saying everything's on schedule so we'll take them for their word at this point ai cloud services this is the good business the one that they should be really leaning into i mean you have two pathways for making the same dollar one is really easy one is really hard which one should you be focused on well the really easy one and i think iris energy will be doing this it's okay if they you know take advantage of this bitcoin bull run which is anticipated which i anticipate which i think is still has you know a lot of juice left into it left in it it's okay but you have to be thinking beyond the bull run after the bull run how are you going to sustain and grow ai cloud services i think is the answer if you look at the cloud services revenue increased by 17 versus june for 42 versus may they're still chugging along their fleet is currently fully utilized so they need to expand service and customers today across the reserved and on-demand market so they're gaining experience with this and they're planning to launch the children's gpu pilot in the second half of 2024 so silver lining there so some capacity increase for the ai cloud services they have 510 megawatts of data centers in 2024 at least planned out so they're going to add 100 in q3 and another 150 in q4 so i'm reading here children's power capacity increase from 600 megawatts to 750 megawatts good and by the way just to remind you morgan stanley put a report out that basically put the value per watt at around 5 to 12 for watts that were servicing data centers so this is really valuable for the company this access to power now if you look here at the capacity megawatts column they're saying that the total megawatt capacity for the company in terms of access to power is greater than 3 000 megawatts so if you were to use the morgan stanley estimate and apply it here you're talking about now additional investments need to be made here this is not you know ready to be used in terms of using the power for ai you know cloud servicing but if we use the morgan stanley estimate there's 15 to 30 billion dollars of value to be unlocked if this power is used for the ai cloud services business and to give you an idea of what this means in terms of upside for investors right now the market cap of the company is 1.3 billion after the fall that we've experienced in the last month so there's a lot of upside here if management does things right i'm hopeful that they will and we should get some additional information about management's thinking from the iron analyst and investor day the annual growth conference august 13 to 15 and there's a bunch of other events happening that iris energy will be a part of in the tail end of august and so hopefully we get some color with regards to management's thinking there all this being said the reason that i am bullish on iris energy is because i think they need to make investments in the low single digit billions into their locations in order to unlock 15 to 30 billion in value from their access to power so at you know 1.3 billion in terms of a market cap you can see the upside there and and now after you know now that the stock is less than seven dollars i think that this is actually a pretty good entry point with with these bitcoin miners they kind of take turns in terms of when they run and this bitcoin run every single time when investor sentiment has turned very bearish it's been a very good time to buy and so i think right now is perhaps one of those times where you know you're getting good value for what you're buying now financial advice be sure to do your own due diligence if i had to i guess i think that this stock will peak this bull run probably you know north of 17 close to 20 and that may be a time you know depending on how i see its cloud services and obviously depending on dilution that might change but depending on how i see their cloud services business going i may decide to sell everything that is and get out of the position entirely i do think that they're so the reason why i'm in iris is because of their cloud services business and their healthy access to power if i wanted to pick a bitcoin miner probably be bit because of their vertical integration and actually for bitdeer their costs for mining bitcoin has remained basically the cheapest amongst the public miners so i think bitdeer is the if you're looking for bitcoin mining i think bitdeer is where it is if you're looking for ai cloud services i think iris energy has a shot to be in a to be a leader there and really create a lot of shareholder value so with that i hope this is this has been useful do leave a like let me see if there's any questions assalamu alaikum salam chocolate wallah nice to see you rashad nice to see you welcome back or can some analysts are staying away from the market until november what is your thought i think that's the wrong move i think maybe we continue to chop until november but i think if you have a 6-12 months time horizon you should be dcaing dollar cost averaging into your favorite positions do you think that iron has reached its lowest point is it wise to dca to iron given these updates yes i think i mentioned that i think dca at these prices is a good idea not financial advice this is what i would do with dips in bitdeer and iron which one should we buy so i'm more bullish on bitdeer than i am iron so you know do with that what you want but i still think iron is a great company a great choice and i think it will probably double from here if not more in the next 6-12 months so i hope that was useful leave a like if you enjoyed it until next time make sure to take care of yourself assalamu alaikum and peace be upon you all