Morgan Stanley Raises WULF and CIFR Targets, Emphasizing Power Pipeline Value

Overview

This report updates the valuation model and target prices for TeraWulf (WULF) and Cipher Mining (CIFR). Morgan Stanley views the addition of new power interconnection projects—WULF's Muskie and CIFR's Riesel/McLennan—as大幅 increasing the potential HPC data center capacity. It adjusts its valuation assumptions to tilt the weighting of unsolicited MW toward higher-credit transactions with Hyperscalers. The firm maintains an Overweight rating and sharply raises target prices, citing the strategic value of fast power availability in the context of AI compute demand growth.

Core views

Core View I: WULF's acquisition of the Muskie data center complex in Eastern Kentucky significantly elevates pipeline value. With an eventual capacity exceeding 1 GW, the initial 500 MW is scheduled to begin ramp in the second half of 2028, with another 500 MW planned for the second half of 2030. Morgan Stanley includes the full 1,000 MW in its pipeline assessment, increasing WULF's total pipeline to 2,550 MW. The site is noted for its scale, transmission access, development readiness, and clear utility path, with分区 permits in place requiring only minor on-site work. With the valuation weighting adjustment, WULF's target price is raised from $42 to $66.50 (a 58% increase), with a bull case of $103. Core View II: CIFR adds the 500 MW Riesel/McLennan site in Texas, increasing its total pipeline to 3,070 MW. The site is in ERCOT's Batch Zero interconnection process with an expected power-on in 2028. Although not a final power guarantee, the commitment, land lock-up, and prior research position it as a monetizable pipeline asset. CIFR's target price is raised from $42.50 to $53.50 (a 25.8% increase), with a bull case of $71. Core View III: Valuation shifts from 50/50 to 80/20 for unsolicited MW, reflecting higher-quality transactions. Previously, Morgan Stanley mixed 50% Hyperscaler-supported economics with 50% conservative Neocloud assumptions. Now, given WULF's and CIFR's ability to secure Hyperscaler-level structures and the expectation for future transactions to include investment-grade client lease obligations, the weighting is 80% toward Hyperscaler economics. This lift increases the per-Watt value expectations (WULF ~$1.50/W, CIFR ~$10.75/W), though they remain below a $15/W ceiling. Core View IV: "Powered shells" leasing value is underrated. The report contrasts traditional renewable PPCs ( unleveraged IRR 9-10%) with数据中心long-term fixed-priceleases (15-25 years) yielding 15-19% unleveraged IRR. At 15x EV/EBITDA,数据中心project net value creation potential is about $15.50/W, far exceeding renewables' ~$1.00/W. This differential emerges from the amplification of low-risk returns from long-term contracts and high-quality client credit.

Analysis framework

Morgan Stanley's approach is grounded in the "constrain is value" principle. It identifies AI deployment's primary bottleneck as not model quality but rather power, transmission, and time-to-power constraints. The analysis employs a Sector-by-Segment Plus (SOTP) and Discounted Net Asset Value (Discounted NAV) framework, segmenting operations into existing HPC leasing, bitcoin mining capacity, and development pipelines. The critical lever is the valuation of "development pipelines": no longer averaged across all unsolicited MW, it is weighted by counterparty credit quality and informed by recent "powered shells" comparables on cost, IRR, and leverage. Finally, it benchmarks PPC versus数据中心leasing financial structures to argue that current valuations have not fully priced the strategic value and value creation capacity of these companies in solving AI infrastructure bottlenecks.

Methodology notes

• Valuation MethodSOTP Valuation

  Segment Plus Valuation

  Companies' business is partitioned into segments (e.g., existing HPC leasing, bitcoin mining, unsolicited pipelines), each valued with appropriate methods (e.g., DCF, EV/Watt) and then aggregated to reflect differing risk and return characteristics.

• Industry/Thematic FrameworkSupply-demand framework

  Power and Transmission Scarcity Analysis

  In the AI infrastructure industry, the constraint lies not on land or buildings, but on the availability of reliable power and high-voltage transmission. Entities able to deliver rapid time-to-power gain a premium.

• Valuation MethodNAV Net Asset Value

  Discounted Net Asset Value

  Applicable to heavy, development-stage assets, it projects future cash flows and discounts them to estimate current net asset value, commonly used for data center pipelines and real estate.

• Fundamental and Financial FrameworkFree cash flow analysis

  Unleveraged Free Cash Flow Yield Comparison

  Compares unleveraged free cash flow yields across asset classes (e.g., renewable PPC vs数据中心leases) to evaluate return-on-investment efficiency and value creation potential.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• TeraWulf Inc (WULF.US)

  Benefit: Acquiring Muskie adds 1,000 MW pipeline; strong record in acquiring power infrastructure and BTC-to-HPC conversions.

  Strengths

  Robust power infrastructure build and acquisition track record; successful BTC-to-HPC transition transactions; Muskie benefits from clear utility path and transmission support.

  Weaknesses

  First 500 MW ramps in the second half of 2028 with a time-to-power lag.

  Comparison

  Outperforms peers in acquiring large, credible power opportunities; higher upside potential given valuation upgrade.

  Risks

  Proposed New York state legislation暂停数据中心 permits for one year could impact ~600 MW of power access; execution risks leading to delays or cost overruns.

• Cipher Mining Inc. (CIFR.US)

  Benefit: Riesel/McLennan enters ERCOT Batch Zero, strengthening monetization potential of pipelines.

  Strengths

  Advantaged position in ERCOT interconnection process; deposits funded, land locked; benefits from ERCOT Batch Zero evaluation.

  Weaknesses

  Batch Zero does not guarantee final power-on; still requires studies and approvals; IRR of leases is lower than WULF's.

  Comparison

  As a key beneficiary of ERCOT Batch Zero, its pipeline assets show strong monetization attributes but execution risks remain.

  Risks

  Failure to monetize HPC pipelines limits upside; lease economics may underperform assumptions; AI spending could slow.

Key data

• WULF Target Price$66.50Raised from $42.00, implying ~151% upside
• CIFR Target Price$53.50Raised from $42.50, implying ~103% upside
• WULF新增Pipeline Capacity1,000 MWFrom Muskie project; total pipeline reaches 2,550 MW
• CIFR新增Pipeline Capacity500 MWFrom Riesel/McLennan; total pipeline reaches 3,070 MW
• Unsolicited MW Valuation Weighting80/2080% Hyperscaler economics, 20% Neocloud (previously 50/50)
• Data CenterPowered Shells unleveraged FCF Yield15-19%Significantly higher than traditional renewable PPC's ~10%
• Example Transaction Value Creation~$15.50/wattBased on $10/watt cost, 17% IRR, and 15x EV/EBITDA multiple

Impact & implications

The report views WULF and CIFR as "de-bottlenecking" plays, not model-producing companies, but as entities owning scarce time-to-power capacity. With AI inference intensity and model complexity growing nonlinearly, demand for compute and power is set to compound. Both companies enhance this稀缺ity through adding high-quality pipelines and refining valuation assumptions, showcasing the capability to convert bitcoin mining infrastructure into high-value HPC data centers. The market has not fully priced this value creation, especially from long-term investment-grade leases that deliver stable cash flows and higher returns. 2026 is labeled the "execution year," but power scarcity will remain a structural theme for years, offering sustained strategic value.

Risks

• Proposed legislation in New York state could暂停数据中心 permits for one year, affecting WULF's power access.
• Execution risks including supply chain frictions, labor availability, and utility coordination may cause delays and cost overruns.
• Lease economics may underperform per-Watt assumptions.
• Failure to monetize HPC pipelines limits valuation upside.
• Slowing AI spending is the largest single risk.
• Uncertainty in ERCOT studies and approvals; Batch Zero is not a final power guarantee.

What to watch

• Progress of WULF's first 500 MW Muskie ramp in the second half of 2028.
• CIFR's inclusion and approval status in ERCOT Batch Zero for Riesel/McLennan.
• Signing of new Hyperscaler leasing agreements and realization of per-Watt value.
• Outcome of New York state's potential one-year暂停 on数据中心 permits.
• Impact of AI model capability improvements on inference intensity and compute demand growth.