Iris Energy (IREN) shares experienced a significant decline, plummeting nearly 14% following a short-selling exposé by Culper Research. The report highlighted the purported inadequacy of the company’s Childress, Texas site for artificial intelligence (AI) or high-performance computing (HPC). Contrary to this assertion, broker Bernstein emphasized in a research report that Iris Energy has dedicated the majority of its planned expansion at this location to bitcoin mining, supported by robust power and data center infrastructure.

Analysts, spearheaded by Gautam Chhugani, clarified that Iris Energy has not professed any intentions to retrofit its bitcoin mining site in Childress for AI purposes. The broker’s assessment indicates that 65% of the company’s valuation emanates from bitcoin mining activities, while the remaining 35% is attributed to AI/HPC. Bernstein adamantly refutes the notion that the mining operations lack value.

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The potential for AI growth for Iris Energy primarily resides in the 1.4 gigawatt West Texas site, which benefits from a power interconnect. The report identifies significant opportunity in leveraging the land and power supply for monetization. Bernstein notes that Iris Energy’s current capital expenditure metric of $1 million per megawatt reflects the costs associated with bitcoin mining. Thus, comparisons to AI/HPC capital expenditures are deemed irrelevant.

The company’s valuation aligns with other prominent bitcoin miners such as CleanSpark (CLSK) and Marathon Digital (MARA), whose valuations are predominantly driven by mining operations, as stated in the report. Earlier this week, Bernstein initiated coverage of Iris Energy with an outperform rating and a price target of $26. The shares closed at $11.20 on Thursday.