In a recent analysis, Morgan Stanley has suggested a potential bullish turnaround for two stocks connected with Bitcoin, namely Cipher Mining and TeraWulf, despite the current slump in the cryptocurrency market. The investment firm has initiated coverage on both companies, assigning them “overweight” ratings, which indicates a positive outlook.
Morgan Stanley analysts set an ambitious price target of $38 for Cipher Mining, reflecting an upside potential of 158%. They also placed a $37 target on TeraWulf, signaling a potential upside of 159%. The optimism surrounding these stocks stems from their strategic pivot; both companies are transitioning from Bitcoin mining to becoming data center providers, capitalizing on the growing demand for AI-related computational power.
The analysts, led by Stephen Byrd, highlighted a significant shortage in AI compute-related supply, which is increasing the demand for “time to power” solutions. These innovations aim to minimize deployment time and maximize operational uptime, essential for hyperscale cloud services. Recent updates from leading hyperscalers indicate a growing appetite and budget for increased computing power, which bodes well for companies like Cipher and TeraWulf that are adapting their operations.
While existing data center developers in the U.S. and Europe face substantial power access bottlenecks, Morgan Stanley noted that even if they secure partnerships with Bitcoin firms, they would still struggle with power shortages. As a result, hyperscalers are expected to pay higher premiums for time-to-power solutions offered by companies that were once primarily focused on Bitcoin mining.
In the broader cryptocurrency landscape, Bitcoin has struggled recently, trading at approximately $70,385.89—over 40% lower than its all-time high of more than $126,000 reached last October. Following a dip to a nearly 16-month low of around $60,000, Bitcoin has experienced fluctuations, rebounding slightly after that decline. During the past week, Cipher Mining’s shares saw a 6% increase, while TeraWulf’s shares surged by 21%, even as Bitcoin itself fell approximately 10%.
Despite the optimistic projections, the outlook is not without risks. Morgan Stanley cautioned that credit challenges could hinder the expansion of data center capacities to meet the demands of AI clients. Additionally, large-language models may encounter scaling obstacles, and the conversion process of Bitcoin mining facilities into data centers might face unexpected cost overruns.
As Cipher Mining and TeraWulf navigate this transitional phase, their performance will be closely monitored by investors, particularly given the volatile environment of cryptocurrencies and the burgeoning AI sector.
