Core Scientific's 75% return on AI deal isn't the template for bitcoin miners, Bernstein says

Quick Take

• Bernstein's returns analysis puts TeraWulf and Cipher at 5% and 4% stabilized ROA, well below the eye-catching 75% Core Scientific posts on its CoreWeave deal.
• Bitcoin miners have contracted 7 GW of power to hyperscalers, neoclouds and chipmakers across 19 deals worth more than $135 billion over the past two years, analysts said.

Core Scientific's (CORZ) AI colocation deal with CoreWeave generates a five-year average return on assets of 75% and a yield on cost of 79%, but the economics behind those numbers are not the sector norm, Bernstein said in a Wednesday note.

Analysts at the brokerage and research firm led by Madison Rezaei and Gautam Chhugani applied a stabilized returns framework to data center REITs and bitcoin miners, then pivoted to AI infrastructure, comparing Digital Realty and Equinix against TeraWulf (WULF), Cipher (CIFR), Core Scientific, CleanSpark (CLSK), and Riot Platforms (RIOT).

The outliers

Core Scientific's returns are driven by the capex structure rather than the deal terms.

Per Bernstein, the company pays an effective $1.5 million per IT MW on 590 MW contracted to CoreWeave, with the tenant financing $750 million of the $855 million total through revenue prepayments and the remaining $105 million coming off Core Scientific's balance sheet.

Riot 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. That puts it on par with Equinix.

Bernstein treats both as exceptions. "We believe such capex advantaged deals are limited and do not reflect the overall economics of emerging AI infra players," the analysts wrote.

What the baseline looks like

TeraWulf, at 5% ROA and 19% yield on cost, and Cipher, at 4% and 17%, are closer to what the subsector should deliver long term. CleanSpark lands in the same range at 4% and 17%. 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 claws back the gap in operating efficiency. Its 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 and lift NOI margins toward 100%.

CleanSpark's $6.6 billion, 20-year lease for 175 IT MW in Sandersville, Georgia, reportedly its first AI colocation deal, 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.

Deal terms are improving

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.

Bernstein prefers yield-on-cost at the asset level, arguing that ROA is distorted by variations in depreciation policies, definitions of "stabilized" assets, and capex structures.

Two different businesses

The divide runs deeper than the metrics. Digital Realty and Equinix operate mature portfolios of hundreds of stabilized facilities in major metro markets, compared with a handful of rural sites anchored to single hyperscaler contracts on the miner side.

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 is Market-Perform at $17.

The 7 GW miners have contracted to date represent less than a quarter of their 30 GW planned power pipeline.