Key Points
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The artificial intelligence industry can offer some of the highest returns of the decade.
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Iren’s annual recurring revenue is growing quickly, and the per-megawatt value continues to climb.
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Netlist is already delivering solid results and recently landed a big deal with Samsung.
- 10 stocks we like better than Iren ›
It’s always good to look for new investment ideas. While investors can look at various sectors, I like to focus on artificial intelligence (AI) stocks. This technology is still in its early stages and can fundamentally change societies. Autonomous vehicles, humanoid robots, drones, and AI chatbots are some of the products and services that can scale rapidly as AI evolves.
That’s why the two stocks I am buying in 2027 revolve around that theme. I already have positions in each of these companies and intend to build on them in 2027.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
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1. Iren
Iren (NASDAQ: IREN) is my favorite neocloud stock. Nebius (NASDAQ: NBIS) is also a strong contender and slightly ahead of Iren in revenue recognition, but I do not believe Nebius should have a market cap almost four times Iren’s.
The neocloud thesis is straightforward. Hyperscalers need access to compute, and companies like Iren create the data centers that supply hyperscalers with the necessary chips, power, software, and facilities.
Iren wrapped up its fiscal 2026 fourth quarter with $1 billion in operating annual recurring revenue. The company expects to reach $4 billion in annual recurring revenue by the end of 2026. As Iren strategically waits to sign big deals, the value of compute continues to climb. The landmark five-year, $9.7 billion deal with Microsoft comes to $9.7 million per megawatt-year. Iren is now negotiating deals for $25 million per megawatt.
If Iren can eventually realize $25 million per megawatt across its entire 5.8-gigawatt portfolio, it can generate $145 billion in annual recurring revenue, assuming the per-megawatt value doesn’t continue to climb.
Some investors are worried about rising capital expenditures, but I don’t think it will be that big of a deal. Iren is getting customers to prepay 45% to 55% of each contract, which makes it easier to fund data center builds. The company can also continue GPU financing and borrow against its data centers to ensure no further dilution occurs.
2. Netlist
I like to focus on smaller AI stocks, and Netlist (OTC: NLST) certainly qualifies with a $2 billion market cap. It is developing CXL solutions that can be a major part of AI infrastructure in the future. Netlist also makes a lot of money reselling memory products, but its patent portfolio can yield immediate upside.
The company reached a strategic agreement with Samsung after a lengthy patent infringement legal battle. Samsung must pay an up-front licensing fee of $239 million plus quarterly royalty payments of up to $32.9 million for five years. Netlist also has the right to buy up to $300 million in Samsung memory products each year for five years, guaranteeing chips at a time of intense supply constraints.
The total five-year contract can reach up to $897 million in gross license revenue, including the up-front fee. Almost all of that is pure profit, and Netlist no longer has to spend as much on legal. The company is pursuing similar actions against Micron Technology, which can result in another lucrative agreement, especially after its success with Samsung.
Some investors exited their positions due to a headline about Netlist losing its appeal in a patent case to Micron. While Netlist lost that case, it’s completely different from the critical patents that Netlist used to get a deal with Samsung. Micron is still on the hook for $445 million in the patent infringement case that serves as a major catalyst for Netlist shares.
The growth stock plummeted by more than 20% on that news, but the price move was misguided. Losing one patent deal isn’t synonymous with losing the critical deals that can force a strategic deal like the one Netlist secured for Samsung.
Should you buy stock in Iren right now?
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Marc Guberti has positions in Iren and Netlist. The Motley Fool has positions in and recommends Micron Technology and Microsoft. The Motley Fool has a disclosure policy.
