Bernstein analysts led by Madison Rezaei and Gautam Chhugani released a research note on Wednesday analyzing bitcoin miners' AI colocation deals, finding that Core Scientific's (CORZ) partnership with CoreWeave generates a five-year average return on assets of 75% and a yield on cost of 79%. The analysts determined these returns are driven by the capex structure rather than deal terms, with Core Scientific paying an effective $1.5 million per IT MW on 590 MW contracted to CoreWeave. Bernstein applied a stabilized returns framework comparing data center REITs Digital Realty and Equinix against bitcoin miners TeraWulf (WULF), Cipher (CIFR), Core Scientific, CleanSpark (CLSK), and Riot Platforms (RIOT), concluding that Core Scientific's economics do not reflect sector norms.
Core Scientific and Riot Show Outlier Performance Driven by Capex Structure
Core Scientific's returns stem from its capital expenditure arrangement, with the tenant CoreWeave financing $750 million of the $855 million total through revenue prepayments and the remaining $105 million coming from Core Scientific's balance sheet. Riot Platforms sits in similar territory at a 23% five-year average ROA and 29% yield on cost, driven by an incremental $3.5 million per IT MW to retrofit existing bitcoin facilities. Bernstein treats both companies as exceptions, stating that such capex advantaged deals are limited and do not reflect the overall economics of emerging AI infrastructure players.
TeraWulf and Cipher Establish Baseline Returns for AI Colocation Sector
TeraWulf delivers 5% ROA and 19% yield on cost, while Cipher achieves 4% ROA and 17% yield on cost, representing what Bernstein considers closer to long-term subsector delivery. CleanSpark lands in the same range at 4% ROA and 17% yield on cost. TeraWulf's capex advantage runs to $8 million to $10 million per IT MW, against Cipher's $9 million to $11 million per IT MW, a function of existing power and transmission infrastructure at its brownfield industrial sites. Cipher's blended average EBITDA margin of 94% beats TeraWulf's 85%, an outcome of triple-net lease contracts with AWS that push power costs, taxes, and other operating expenses to the tenant. CleanSpark's $6.6 billion, 20-year lease for 175 IT MW in Sandersville, Georgia, carries an average annual revenue yield of roughly $1.9 million per IT MW, compared with $2.4 million on TeraWulf's 20-year Anthropic contract with the same triple-net structure.
Bernstein Sets Outperform Ratings with Price Targets Across Sector
Bernstein rates the entire sector Outperform, with price targets of $36 on TeraWulf, $32 on Cipher, $32 on Core Scientific, $30 on Riot and $24 on CleanSpark. MARA receives a Market-Perform rating at $17. Unlevered IRRs across the colocation deals Bernstein tracks range from 8% to 13%, against current financing costs of 6% to 7%. Cipher's repeat contract with AWS lifted revenue yield to $1.9 million per IT MW from $1.7 million, roughly 13% higher, without giving up the triple-net structure. The 7 GW miners have contracted to date represent less than a quarter of their 30 GW planned power pipeline.
FAQ
What returns does Core Scientific's AI deal with CoreWeave generate?
Core Scientific's AI colocation deal with CoreWeave generates a five-year average return on assets of 75% and a yield on cost of 79%, according to Bernstein's research note released on Wednesday.
Why does Bernstein consider Core Scientific's returns an outlier in the bitcoin mining sector?
Bernstein determined that Core Scientific's returns are driven by its capex structure rather than deal terms, with the tenant CoreWeave financing $750 million of the $855 million total through revenue prepayments. The analysts stated that such capex advantaged deals are limited and do not reflect the overall economics of emerging AI infrastructure players.
What are the baseline returns Bernstein expects for bitcoin miners entering AI colocation?
Bernstein considers TeraWulf at 5% ROA and 19% yield on cost, and Cipher at 4% ROA and 17% yield on cost, as closer to what the subsector should deliver long term, with CleanSpark landing in the same range at 4% ROA and 17% yield on cost.
