IREN Stock Drops Below Key Support as AI Pivot Faces Major Headwinds

IREN (NASDAQ:IREN) stock extended its steep decline, falling to its lowest level since September 9 last year. It ended the week at $26.90, down 65% from its all-time high, with its market capitalization dropping from over $24 billion to $10.9 billion. The sell-off may continue as the company’s pivot from Bitcoin (CRYPTO: BTC) to AI faces major headwinds. IREN Stock is Falling as Neocloud’s Risks Rise IREN, formerly known as Iris Energy, is a Bitcoin mining company pivoting to the AI data center industry. It is building massive data centers in the hope of becoming a major provider to hyperscalers and other AI labs. The company has already secured deals with Microsoft (NASDAQ:MSFT) and Perplexity AI. IREN’s transition has been justified because of the ongoing challenges in the Bitcoin mining industry. Bitcoin has remained in a bear market after falling by 35% from its all-time high. It also experiences a halving process every four years that reduces rewards by half, raising the mining difficulty. Read Also: Broadcom Stock Is Down 35% From Its Peak as AI Bubble Warnings Rise, but Analysts Stay Optimistic The challenge, however, is that the company is facing some major headwinds. Gartner (NYSE:IT) has warned that neocloud companies will need to announce major impairments in the next few years. Some analysts believe that the depreciation of these GPUs will happen at a faster pace than expected. The industry is also becoming highly competitive, with top companies like SpaceX (NASDAQ:SPCX) and Riot Platforms entering the industry. Meta Platforms has hinted that it will start leasing extra space to other companies. The cost of data center deployment is also rising, pushing IREN and other neocloud companies to raise billions of dollars. IREN’s outstanding shares have jumped to 380 million from 197 million in 2024. Its debt has jumped to over $7.4 billion from $962 million last year. Its depreciation and amortization costs have continued rising. IREN Shares Have Dropped Below Key Support Level IREN stock chart | Source: TradingView Technicals suggest that the sell-off has more room to run. It has dropped below the crucial support level of $28.77, its lowest level on July 30th this year. Before that, it dropped below $33.47, its lowest points in December and March. The stock has formed a death cross pattern as the 50-day moving average dropped below the 200-day moving average. Notably, it has slumped below the 61.8% Fibonacci Retracement level of $32.55. Therefore, these technicals suggest that IREN may continue falling, potentially to the 78.6% retracement level of $20.4. A move above the resistance level of $33.4 will invalidate the bearish outlook. Read Also: CoreWeave Stock Forms H&S Pattern as Key Bond Yield Hits 15% Amid Insider Selling Image: Shutterstock