Investment bank Jefferies, in its latest research report on the AI data center industry, cut its price targets on three Bitcoin miners pivoting into AI infrastructure companies — TeraWulf (WULF), Hut 8 (HUT) and Cipher Digital (CIFR) — while maintaining "Buy" ratings on all three, signaling the firm remains positive on their long-term prospects.
According to the report, Jefferies said it had adjusted its valuation models for AI infrastructure companies to reflect the results of the U.S. midterm elections and the impact of tenant change orders. Analyst Jonathan Petersen lowered the price targets on all three companies in the report but stressed that the revised targets still imply significant upside.
On individual companies, TeraWulf's price target was cut to $14 (about NT$460) from $15 (about NT$490), implying roughly 13% upside based on Monday's closing price. The analyst noted that the company has substantial contracted capacity but has delivered only a limited number of megawatts, which is the main reason the stock continues to reflect an "execution discount."
Hut 8's price target was lowered to $81 (about NT$2,700) from $90 (about NT$3,000), implying upside of more than 42%. Jefferies believes Hut 8 has secured two lease arrangements with strong credit support over the long term: one fully backstopped by Alphabet's (GOOGL) Google without equity dilution, and the other signed directly with Nvidia (NVDA). The firm added that Hut 8's project delivery is concentrated in later stages, but as construction milestones advance and project financing falls into place, its adjusted funds from operations (AFFO) could reach an inflection point.
Cipher Digital's price target was cut to $10 (about NT$330) from $12 (about NT$400), implying upside of nearly 47%. Jefferies is positive on the company's long-term outlook, mainly because Cipher has built a diversified tenant base among several investment-grade or investment-grade-backed hyperscale cloud service providers, giving it a financeable platform — even though the company has yet to deliver any AI data center megawatt capacity.
Note: Implied upside is calculated based on Monday's closing price.
As demand for AI computing power continues to climb, more and more Bitcoin miners are leveraging their existing power resources, land reserves and data center infrastructure to expand into high-performance computing (HPC) and AI data center businesses. However, compared with traditional Bitcoin mining, AI infrastructure projects require more construction capital and must go through multiple stages — power interconnection, data center construction, equipment installation and customer acceptance — before they can truly be converted into rental income.
Jefferies' target cuts reflect a new round of valuation scrutiny facing the AI data center industry, as the market reprices project execution timelines, financing costs and regulatory uncertainty. As AI data center investment continues to scale up, investors' criteria for evaluating the companies involved are shifting from a simple focus on contracted capacity and potential contract value toward greater emphasis on actual delivery capability, the pace of revenue realization and return on capital.
Although Jefferies remains bullish on the long-term prospects of all three companies, whether they can honor signed long-term contracts, successfully complete project financing and achieve cash flow growth will be key to determining whether their valuations can re-expand.
