Core Scientific's 75% AI return is an outlier, Bernstein says

Core Scientific's 75 percent average return on its CoreWeave AI colocation deal is not replicable across the bitcoin mining sector, Bernstein said.

"We believe such capex-advantaged deals are limited and do not reflect the overall economics of emerging AI infrastructure players," analysts led by Madison Rezaei and Gautam Chhugani at Bernstein wrote in a research note Wednesday.

The brokerage applied a stabilized returns framework comparing bitcoin miners against data center REITs. TeraWulf posted 5 percent ROA and 19 percent yield on cost, while Cipher Mining delivered 4 percent and 17 percent — figures Bernstein treats as the sector baseline. CleanSpark landed in the same range at 4 percent and 17 percent. Riot Platforms, at 23 percent ROA and 29 percent yield on cost, was also flagged as an exception.

The divergence matters because investors have piled into bitcoin miner stocks on expectations that AI colocation will supercharge returns. Core Scientific's numbers — driven by CoreWeave financing $750 million of the $855 million total through revenue prepayments — set an unrealistic benchmark for the rest of the sector, Bernstein said.

Core Scientific pays an effective $1.5 million per IT megawatt on 590 megawatts contracted to CoreWeave, with only $105 million coming off its own balance sheet. That capital-light structure drives the 75 percent five-year average return on assets and 79 percent yield on cost.

TeraWulf's capex advantage runs to $8 million to $10 million per IT megawatt, against Cipher's $9 million to $11 million per IT megawatt, a function of existing power and transmission infrastructure at brownfield industrial sites. Cipher claws back the gap in operating efficiency: its blended average EBITDA margin of 94 percent beats TeraWulf's 85 percent, an outcome of triple-net lease contracts with Amazon Web Services that push power costs and taxes to the tenant.

CleanSpark's first AI colocation deal — a $6.6 billion, 20-year lease for 175 IT megawatts in Sandersville, Georgia — carries an average annual revenue yield of roughly $1.9 million per IT megawatt, compared with $2.4 million on TeraWulf's 20-year Anthropic contract with the same triple-net structure.

Unlevered internal rates of return across the colocation deals Bernstein tracks range from 8 percent to 13 percent, against current financing costs of 6 percent to 7 percent. Cipher's repeat contract with AWS lifted revenue yield to $1.9 million per IT megawatt from $1.7 million, roughly 13 percent higher, without giving up the triple-net structure.

Bitcoin miners have contracted 7 gigawatts of power to hyperscalers, neoclouds and chipmakers across 19 deals worth more than $135 billion over the past two years, Bernstein said. That represents less than a quarter of their 30-gigawatt planned power pipeline.

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 rated Market-Perform at $17.

This article is for informational purposes only and does not constitute investment advice.