Bernstein Global Digital Assets: Emerging AI Infra — Initiating Coverage (TeraWulf, Cipher Digital): The Power Landlords of AI
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Bernstein has initiated coverage on the emerging AI infrastructure sector, designating TeraWulf and Cipher Digital as the primary power landlords of artificial intelligence. As computational demands escalate, electricity supply has become the most critical bottleneck for AI expansion. Both companies possess strategically valuable, low-cost power assets originally developed for cryptocurrency mining, which can be rapidly repurposed for AI data center hosting. By adopting a power landlord model, these firms lease electricity and physical infrastructure rather than operating compute capacity directly, thereby securing stable, predictable cash flows with significantly lower operational risk. TeraWulf benefits from an incredibly low cost of power at roughly $0.02 per kilowatt-hour, alongside operational mining facilities that enable seamless transitions to AI hosting. The firm projects TeraWulf's 2025 EBITDA to reach $250 million. Cipher Digital, focused on aggressive capacity expansion, targets $180 million in EBITDA, supported by both Bitcoin mining and emerging AI lease agreements. Bernstein assigns an Outperform rating to both stocks, setting a target price of $5.50 for TeraWulf and $8.00 for Cipher Digital. Primary catalysts include the execution of new AI leasing contracts, regulatory approvals for power capacity expansions, and consistent construction milestones. Key downside risks involve potential development delays and renegotiation of power purchase agreements.
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