Morgan Stanley analysts say the two bitcoin mining stocks have significant upside potential, but it’s not tied to a bullish outlook for the cryptocurrency.
Rather, the companies are well-positioned to pivot to data centers to fuel the AI boom, the bank said in a Feb. 8 note to clients.
Morgan Stanley said in a note initiating coverage of the stock that Terrawolf and Cipher Mining were up 159% and 158%, respectively. Both companies have seen their stock prices rise significantly over the past 12 months, with TeraWulf up 245% and Cipher up 183%.
The bank cited the following reasons for its “abnormally high” price target:
- AI capabilities continue to improve dramatically
- There is still a lot of value creation for both AI enablers and adopters.
- Demand for AI computing power exceeds supply
- Demand and supply imbalance should reduce power bottlenecks
- Current bottlenecks mean Bitcoin miners-turned-AI data centers are currently the ‘most attractive’ option for data center developers
A team of analysts led by Stephen C. Byrd said that TeraWulf, in particular, “has a significant history in building power infrastructure and has a track record of multiple Bitcoin-to-DC conversion transactions with customers.” “In our view, the company has a viable path to significant annual growth in power and data center capacity, and we include this growth potential in both our base and bull cases.”
Meanwhile, Cipher Mining “has signed multiple contracts with data center customers and has assembled a team with extensive experience in data center construction,” analysts said. As of Q2 2025, the company had no AI power hosting contracts, but it currently has 10-year and 15-year contracts with Google and Amazon, respectively.
From June to December 2025, equity value creation per watt for companies like TeraWulf and Cipher Mining rose from approximately $7 to $18, demonstrating strong demand for electricity.
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Although Morgan Stanley has strong upside targets, the bank said there are risks to its outlook. One is that companies have not been able to properly transform their data centers.
“These data center projects are very large compared to the overall Bitcoin enterprise size, and execution risks could result in project delays and cost overruns,” the analysts said. “As a result, more equity capital may be required to fund these data center projects, which could result in unanticipated dilution and financing issues.”
Another is that hyperscalers may start reducing spending on AI. Investors have been nervous about AI capital spending in recent months, continuing to look for clues about how hundreds of billions of dollars a year of investments will be recouped.
“While we view a slowdown in AI spending as the biggest single risk, last week’s update from hyperscalers suggests that the risks to AI infrastructure capital spending are to the upside, not the downside,” the note said. “While the AI infrastructure industry remains underpowered, major AI players may curb data center capital spending for a variety of reasons.”
