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Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Caterpillar (NYSE: CAT) has been outperforming the S&P 500 by riding artificial intellgience (AI) tailwinds, and a recent correction doesn’t change that fact. While talks about a slowdown in AI development gripped headlines, they were largely for naught, with Meta Platforms CEO Mark Zuckerberg saying that market forces and competition are enough to keep AI models safe.

Hyperscalers are ramping up their AI development, and Caterpillar is at the center of it, since power is a critical bottleneck. That’s the basic setup for why Caterpillar’s correction won’t last for long, but there are additional details that can fuel a rally.

Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »

The AI build-out needs power and infrastructure

Caterpillar is gaining market share across multiple key industries vital to artificial intelligence. First, its power & energy segment increased by 17% year over year in the second quarter.

High demand from AI data centers has ignited this segment of the business to the point where Caterpillar is sitting on a $72 billion backlog. The backlog has almost doubled year over year and provides meaningful revenue visibility. It’s also up by $9.4 billion sequentially, which represents a 15% boost.

Second, AI data centers still need to be built to accommodate the increased need for compute. As hyperscalers gobble up existing gigawatts for their long-term projects, it further restricts the supply of remaining compute. Its construction segment saw a 35% year-over-year revenue jump.

Most of the growth came from North America, which correlates with where most tech giants are setting up data centers. Construction revenue was up year over year in every region.

The valuation looks more compelling

Dips present good buying opportunities when a company’s fundamentals improve or remain stable. In Caterpillar’s case, the company has demonstrated deep involvement in the AI boom, with the backlog serving as a multi-year green flag.

The correction has brought Caterpillar down to a 1.4 PEG ratio. The stock has previously hovered above a 2 PEG ratio, and its other valuation metrics, including the P/E ratio, are much lower than they were a few months ago.

An investment in Caterpillar right now is a bet that the AI boom will continue. Grand View Research projects a 30.6% CAGR for the artificial intelligence industry through 2033. In the meantime, hyperscalers continue to commit vast sums to capital expenditures. Six of the major hyperscalers are projected to spend $1.3 trillion in 2027.

Caterpillar addresses power and construction, bottlenecks that will remain in place throughout the build-out. As tech leaders invest more capital and secure more resources, the remaining power and construction services will surge in value, potentially translating into sizable returns for long-term investors.

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The Caterpillar Correction Shouldn’t Last Much Longer was originally published by The Motley Fool

Just over a year ago, investors largely viewed IREN (IREN) as a bitcoin mining company. Today, the company supplies AI infrastructure to Microsoft (MSFT) and signs billion-dollar contracts with some of the biggest names in the AI market, including Nvidia (NVDA) and Dell Technologies (DELL). These developments provide evidence that IREN’s shift toward AI infrastructure is translating into actual business activity, and the market has responded strongly to that progress. IREN shares have been rewarded with two strong moves over the last two months.

The Microsoft Deal That Changed Everything

IREN’s AI transformation centers on a major five-year agreement with Microsoft. The company entered into a $9.7 billion cloud services agreement with Microsoft, with 20% of the contract value paid upfront. Once fully commissioned, the deal is expected to generate nearly $1.94 billion in annualized run-rate revenue. That gives IREN a significant source of contracted business as it builds out its AI cloud operations.

More News from Barchart

The key point is that the agreement is already translating into real infrastructure. The company has completed and delivered the first of four planned “Horizon” AI cloud deployments for Microsoft. The deployment is a 50-megawatt liquid-cooled installation at IREN’s Childress, Texas campus. Nvidia has also granted IREN Exemplar Cloud status after testing the deployment’s GB300 NVL72 setup. That validation is important because it shows Nvidia has tested IREN’s infrastructure and confirmed its ability to support demanding AI workloads.

IREN’s planned capacity expansion shows just how quickly its business is changing, growing from roughly 3 megawatts of AI cloud capacity a year ago to 480 megawatts being delivered in 2026. The neocloud is targeting 1.2 gigawatts by 2027, which would amount to more than a hundredfold growth in capacity over about two years. Importantly, the expansion is already backed by a committed timeline.

At the same time, the company is building a revenue base that goes well beyond Microsoft. After securing $2.8 billion in new contracts, IREN raised its year-end 2026 annualized revenue target to more than $4 billion. Around 85% of that revenue target is already covered by signed contracts. The customer list has also expanded to include Together AI, Nvidia, Figure AI, Perplexity, and Fluidstack.

Delivery and Contracts, Back-to-Back

IREN received two major catalysts within just a few weeks, giving investors fresh evidence that its AI infrastructure strategy is gaining traction. The first came when the company announced $2.8 billion in new multi-year contracts with AI developers. The new agreements pushed its annualized revenue target above $4 billion, with approximately 85% already under contract. Customer prepayments are also expected to cover about 45% of the GPU spending associated with those contracts.

Investors pushed the stock nearly 8% higher after the news broke. Days later, IREN confirmed the delivery and acceptance of Horizon 1 by Microsoft. The announcement sent shares another 6% higher in premarket trading. The two announcements tell a similar story from different angles. The company is delivering the infrastructure it promised, and new customer commitments are continuing to support the next stage of its expansion.

The delivery of Horizon 1 marks an important step, but the company still has three more phases ahead. The next major test will be whether Horizon 2 through Horizon 4 are delivered according to schedule. Investors will also be watching contract activity closely.

About IREN Stock

IREN was founded in 2018 and is headquartered in Sydney, Australia, where it operates in the data center market. It owns the land, power infrastructure, buildings, and cooling systems needed to run these facilities, while providing the computing equipment, including GPUs, servers, storage, and networking, along with software and support services that help customers run AI applications. The company is also involved in Bitcoin mining through the operation of a peer-to-peer network of computers running the Bitcoin software.

Over the last 12 months, IREN stock has increased nearly 12%, slightly underperforming the S&P 500 ($SPX), which rose approximately 14% during the same period. The modest underperformance appears to be tied to IREN’s ongoing transition from Bitcoin mining to AI infrastructure. While AI Cloud Services revenue surged nearly eightfold in fiscal 2026, the company also recorded a $702.6 million net loss, largely driven by $638.8 million in non-cash impairment charges related to retiring Bitcoin mining equipment.

IREN’s AI Opportunity Is Growing, but So Is Its Spending Bill

IREN reported its fourth-quarter fiscal 2026 earnings on August 27. The company’s revenue rose to $137.2 million as its AI cloud business continued to grow, but the result fell short of Wall Street’s estimate of $157.14 million. It reported a net loss of $684 million, driven largely by non-cash impairments tied to the planned exit from bitcoin mining. On the run-rate shift toward AI cloud, CFO Anthony Lewis said the company exited Q4 at roughly $0.5 billion of ARR. Moreover, the company continues to sign long-term cloud computing agreements with AI companies, including Cohere, Perplexity, Figure AI, and Fal AI.

Looking forward, management gave a very ambitious outlook for the next year. The company expects more than $4 billion of ARR by the December quarter, up from about $500 million at the end of Q4. However, the figure excludes approximately $700 million of ARR tied to its Nvidia cloud contract that is expected to ramp in 2027. Capital spending is set to remain heavy, with IREN guiding fiscal 2027 CapEx to $25 billion to $30 billion. That covers Microsoft capacity, other deployments tied to 2026 ARR targets, air-cooled deployments, and new liquid-cooled capacity.

What Do Analysts Expect for IREN Stock?

Analysts remain positive, as the stock received “Buy” ratings from various analysts in the first two weeks of September. On Sept. 14, J.P. Morgan analyst Richard Choe upgraded IREN to “Buy” and assigned a price target of $65, reflecting 54% upside from current levels. Similarly, BTIG analyst Gregory Lewis reiterated a Buy rating on IREN with a price target of $80, which implies further 90% upside from the current share price level.

Based on 14 Wall Street analysts covering the stock, IREN holds a consensus “Strong Buy” rating. Of those, 12 have a “Strong Buy” rating, and three have a “Hold” rating. The stock has a median price target of $77, which reflects 83% upside from the current share price.

On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com

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This article was written by

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of XIORF either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I will likely continue to add to this position.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.