Compass Point: AI contracts undervalue TeraWulf, Cipher Mining
In brief
- Compass Point separated contracted AI leases from future uncontracted capacity at major mining firms.
- TeraWulf, Cipher Mining, and Applied Digital show largest gap between contracted business and valuations.
- Market undervalues additional AI capacity yet to be leased despite steady rental income potential.
The landlord thesis
Compass Point argues the market is assigning little or no value to additional AI capacity that has yet to be leased at these companies, despite potential for significant rental income once completed. Instead of pricing in future revenue from signed deals, investors have largely ignored the pipeline.
The shift matters because companies should increasingly be valued like landlords that generate rental income rather than traditional bitcoin miners whose earnings depend on cryptocurrency prices. Long-term leases with investment-grade customers offer steadier, more predictable cash flow than bitcoin mining, where revenue swings with cryptocurrency prices.
The execution inflection
The next two years will be a turning point for the sector as companies shift from announcing AI infrastructure deals to delivering them. Compass Point estimates the value of future rental income from signed contracts after accounting for the remaining cost of building each facility.
Core Scientific presents a different picture. Compass Point said the firm's existing contracts are already largely reflected in its valuation, meaning further upside will likely depend on signing new customers. Riot Platforms, by contrast, is valued more on future potential than current lease income, with investors placing a premium on its Corsicana campus and broader AI development pipeline.
Over the past year, shares of several former bitcoin miners have climbed sharply as they unveiled partnerships with hyperscalers and AI companies. The Compass Point analysis suggests the market may be entering a phase where execution matters more than announcements.
