Compass Point Says Cipher and TeraWulf AI Sites Are Undervalued

Compass Point says AI data centers at Cipher, TeraWulf, and Applied Digital may be worth more than the market is pricing in. The bank argues that long-term customer contracts still are not fully reflected in valuations.

Key Takeaways

• Compass Point says former bitcoin miners building AI data centers, including Cipher and TeraWulf, are being priced too cheaply by the market.
• The analysts argue that signed customer contracts and future rental income should carry more weight than traditional mining valuations.
• Compass Point says Core Scientific and Riot Platforms are in a different position, while the sector could hit a turning point over the next two years.

Compass Point says a number of companies that are converting former bitcoin mining sites into AI data centers may be worth more than the market is currently giving them credit for. The analysts say investors are still underpricing customer contracts that have already been signed, even as those agreements become a bigger part of how these crypto-linked companies are valued.

Contracts Over Mining

Analysts Michael Donovan and Ed Engel have put together a framework that separates the value of long-term AI leases from projects that still do not have a customer in place. In their view, these businesses should increasingly be treated like landlords collecting recurring rent, rather than like traditional bitcoin miners whose earnings tend to track the Bitcoin price.

To build that estimate, Compass Point projects future rental income from existing contracts, subtracts the remaining construction costs, and then compares the result with each company’s enterprise value. The goal is to see how much investors are really paying for future capacity that has not been leased yet.

Using that method, Applied Digital, TeraWulf, and Cipher Mining show the largest disconnect between their contracted business and their current valuation. In those cases, Compass Point says the market appears to assign little or no value to additional AI capacity that has not yet been leased, even though that capacity could generate more rental income once completed.

What This Says About the Sector

The report reflects a wider shift in crypto, as former mining companies repurpose their infrastructure for AI workloads. That transition is unfolding alongside a rapidly expanding market for AI data centers, higher capital spending from major cloud providers, and continued growth in demand for computing power and electricity.

For European crypto readers, the main takeaway is that these companies are being judged less on their crypto exposure and more on infrastructure, contracts, and execution. If the sector moves from announcements to finished projects over the next few years, that could reshape how investors value these names, even though it is still unclear exactly how the market will price them.

Core Scientific and Riot Stand Out

Compass Point says Core Scientific and Riot Platforms stand apart from the rest of the group for different reasons. In Core Scientific’s case, most of the existing contracts already seem to be reflected in the valuation, so any further upside would depend mostly on landing new customers. Riot, meanwhile, is being valued more for what it could become than for the lease income it generates today, helped by the Corsicana campus and its broader AI pipeline, even though contracted capacity is still limited for now.

Compass Point expects the next two years to be a key period for the sector. As projects are completed, tenants move in, and payments begin, investors should get a much clearer picture of how much recurring cash flow these sites can actually produce.