AI contracts, not bitcoin, now drive miner valuations, and Cipher and TeraWulf look cheap

Several companies transforming former bitcoin mining sites into AI data centers may be worth more than their current market valuations imply because investors are underestimating the value of their signed customer contracts, according to a report from Compass Point.

Analysts Michael Donovan and Ed Engel developed a framework that separates the value of long-term AI leases already under contract from projects that have yet to secure customers. They argue these companies should increasingly be valued like landlords that generate rental income rather than traditional bitcoin miners whose earnings depend on cryptocurrency prices.

To do that, Compass Point estimates the value of future rental income from signed contracts after accounting for the remaining cost of building each facility. It then compares that figure with each company's enterprise value to estimate how much, if any, investors are paying for future development projects.

Using that approach, the firm said Applied Digital (APLD), TeraWulf (WULF) and Cipher Mining (CIFR) appear to offer the largest disconnect between their contracted business and current valuations. In each case, Compass Point argues the market is assigning little, if any, value to additional AI capacity that has yet to be leased, despite the potential for those projects to generate significant rental income once completed.

Core Scientific (CORZ) and Riot Platforms (RIOT) stand out for different reasons. Compass Point said Core Scientific's existing contracts are already largely reflected in its valuation, meaning further upside will likely depend on signing new customers. Riot, meanwhile, is valued more on future potential than current lease income, with investors placing a premium on its Corsicana campus and broader AI development pipeline despite its relatively limited contracted capacity today.

The report argues the next two years will be a turning point for the sector as companies shift from announcing AI infrastructure deals to delivering them. As projects are completed, tenants move in and rent payments begin, investors will have a clearer picture of the recurring cash flow these facilities can generate. Companies that execute successfully could be rewarded with valuations more in line with other income-producing infrastructure assets.