Morgan Stanley initiated coverage of Cipher Mining and TeraWulf with overweight ratings, setting $38 and $37 price targets implying 158% and 159% upside respectively. The investment firm views these bitcoin miners’ pivot to AI data centers as major growth driver, with hyperscalers paying premiums for “time to power” solutions amid systematic AI compute supply shortage.
Morgan Stanley’s Bullish Thesis on Bitcoin Mining Stocks
Bitcoin may be trading at $70,385, down more than 40% from its October record high of $126,000, but two stocks linked to the flagship cryptocurrency could soon see shares more than double according to Morgan Stanley. In a Sunday note to clients, the investment firm initiated coverage of bitcoin miners Cipher Mining and TeraWulf, giving both stocks “overweight” ratings.
Morgan Stanley analysts led by Stephen Byrd put a $38 price target on Cipher, implying 158% upside, while they set a $37 target for TeraWulf, suggesting 159% upside. “For both companies, this Bitcoin-to-data center growth potential is a significant driver of upside in their respective stocks,” the analysts wrote.
A systematic shortage of AI compute-related supply is driving demand for so-called “time to power” solutions, or technologies that minimize deployment time and maximize uptime. Hyperscalers’ recent capital expenditure updates suggest that appetite and budgets for compute and power are on the rise. As a result, hyperscalers are likely to pay higher premiums to use time-to-power solutions powered by former bitcoin miners that have transformed mining operations into data centers.
Existing American and European data center developers are already facing significant power access bottlenecks, according to Morgan Stanley. “Even if DC developers secured all large US and European Bitcoin company power access, they would still, in our view, be short of access to power,” the analysts stated.
The Bitcoin-to-Data Center Transformation
Cipher and TeraWulf are repurposing their bitcoin mining operations to serve AI players during a downturn in the cryptocurrency market. This strategic pivot addresses fundamental economics: bitcoin mining has become increasingly unprofitable following the 2024 halving that reduced block rewards to 3.125 BTC. With network difficulty rising and energy costs remaining elevated, traditional mining margins have compressed dramatically.
In contrast, AI data center services offer stable, long-term contracts with creditworthy hyperscalers. These agreements provide predictable cash flows far superior to volatile crypto mining revenues. Former bitcoin miners possess critical advantages in this transition: existing infrastructure with cooling systems and power connections, secured access to reliable low-cost electricity in locations with favorable regulatory environments, and technical expertise managing high-performance computing operations at scale.
Morgan Stanley views these companies more like Data Center REITs (Real Estate Investment Trusts) than traditional mining operations. By leasing sites to AI and cloud partners, they secure stable cash flows more valuable and predictable than erratic margins of traditional crypto mining. This business model transformation fundamentally changes valuation frameworks, shifting from volatile crypto exposure to infrastructure play with contracted revenues.
Key Advantages of Miner-to-Data Center Transition
Power Access: Secured electricity capacity in locations with grid reliability and low costs
Existing Infrastructure: Cooling systems, facilities, and power connections already operational
Time to Power: Ability to deploy AI compute capacity faster than building data centers from scratch
Technical Expertise: Experience managing high-performance computing and uptime optimization
In the past week, Cipher shares gained about 6%, while TeraWulf added 21%. Over that same period, bitcoin dropped roughly 10%, demonstrating decoupling from underlying crypto asset as business models diverge.
Why ETFs Offer Safer Exposure Than Individual Stocks
While triple-digit upside is tempting, investing in individual mining stocks remains high-stakes proposition. Both Cipher and TeraWulf have experienced sharp pullbacks and extreme volatility recently. Cipher saw significant declines during broader crypto sell-off in early February 2026, prior to Morgan Stanley’s bullish call.
Choosing an ETF over individual stocks provides built-in volatility buffer. By investing in funds with meaningful weightings in Cipher, TeraWulf, or both—alongside broader baskets of digital assets—investors can participate in upside driven by the Morgan Stanley catalyst while reducing exposure to sudden, idiosyncratic stock declines. Diversification ensures weakness in any single miner doesn’t derail overall portfolio, while still allowing benefit from sector’s broader shift toward AI.
Top ETFs With Cipher and TeraWulf Exposure
Global X Blockchain ETF (BKCH)
With net assets of $252.6 million, this fund provides exposure to 35 companies positioned to benefit from blockchain technology adoption. TeraWulf and Cipher hold sixth and seventh positions respectively, with weightings of 7.04% and 6.02%. BKCH has surged 26.8% over the past year. The fund charges 50 basis points as fees.
Amplify Blockchain Technology ETF (BLOK)
With $1.08 billion in net assets, this fund offers exposure to 54 companies actively involved in blockchain technology development. TeraWulf and Cipher hold second and third positions respectively, with weightings of 4.20% and 4.11%. BLOK has gained 17.2% over the past year and charges 70 bps in fees.
Grayscale Bitcoin Miners ETF (MNRS)
With $11.04 million in AUM, this fund offers exposure to 31 globally listed Bitcoin mining companies. Cipher and TeraWulf hold third and fourth positions respectively, with weightings of 10.37% and 5.60%. MNRS has rallied 28.2% over the past year and charges 59 bps as fees.
VanEck Digital Transformation ETF (DAPP)
With $286.5 million in net assets, this fund offers exposure to 25 companies at the forefront of digital assets transformation. TeraWulf and Cipher hold sixth and eighth positions respectively, with weightings of 5.50% and 4.72%. DAPP has gained 13.3% over the past year and charges 52 bps in fees.
Schwab Crypto Thematic ETF (STCE)
With $245 million in net assets, this fund offers exposure to 42 companies that may benefit from cryptocurrencies and blockchain technology. Cipher holds third position with 6.26% weighting. STCE has gained 26.7% over the past year and charges 30 bps as fees.
Spear Alpha ETF (SPRX)
With $164.6 million in net assets, this fund offers exposure to companies benefiting from cryptocurrencies and blockchain technology. TeraWulf holds fourth position with 5.76% weighting. SPRX has soared 49.3% over the past year and charges 75 bps in fees.
Risks to Morgan Stanley’s Thesis
These plays aren’t failproof according to Morgan Stanley analysts. Credit challenges could stymie efforts to increase data center capacity enough to accommodate AI clients, while large-language models could hit scaling walls that reduce demand for compute capacity. The process of converting bitcoin mining warehouses into data centers could introduce cost overruns that compress margins and delay profitability.
Key Risk Factors
Financing Constraints: Credit market tightening could limit capital for data center capacity expansion
AI Scaling Limitations: Large-language models may hit technical or economic scaling walls reducing compute demand
Conversion Costs: Mining warehouse transformations into data centers may experience cost overruns
Hyperscaler Demand: AI capex budgets could decline if economic conditions deteriorate
Competition: Traditional data center developers may secure alternative power sources reducing miners’ advantages
Additionally, both companies remain partially exposed to bitcoin price volatility through remaining mining operations. If bitcoin continues declining, revenues from mining segments could pressure overall financial performance even as data center businesses grow.
Morgan Stanley’s Track Record and Analyst Credibility
Morgan Stanley’s equity research division carries significant weight in financial markets. Led by Stephen Byrd, the team covering Cipher and TeraWulf specializes in power and utilities sectors, bringing relevant expertise to evaluate data center power economics. This cross-sector perspective provides unique insights into the miners’ transformation that pure tech or crypto analysts might miss.
However, investors should note that Morgan Stanley price targets represent one-year forward projections based on specific assumptions about AI demand growth, hyperscaler capex budgets, and successful business model transitions. These assumptions may not materialize if macro conditions deteriorate or execution falters. As always, conduct independent research and consider personal risk tolerance before acting on analyst calls.
FAQ
Why does Morgan Stanley favor Cipher Mining and TeraWulf specifically?
Morgan Stanley views these miners as best-positioned to capitalize on AI data center demand due to secured power access, existing infrastructure, and strategic partnerships with hyperscalers. Their “time to power” advantages command premium pricing from AI companies desperate for compute capacity.
How realistic is 158% upside for bitcoin mining stocks?
The upside depends on successful business model transitions from volatile crypto mining to stable data center contracts. If hyperscaler demand materializes as Morgan Stanley projects and companies execute conversions efficiently, targets are achievable. However, execution risks remain significant.
Should I buy individual stocks or ETFs?
ETFs provide diversification reducing single-stock volatility while maintaining exposure to Morgan Stanley’s thesis. Individual stocks offer higher upside if the thesis plays out perfectly but carry substantially more risk if execution falters or company-specific issues emerge.
How does bitcoin price affect these stocks now?
As business models shift toward data centers, correlation with bitcoin price should decrease over time. However, both companies maintain some mining operations, creating partial exposure to crypto markets. Recent performance shows early decoupling, with stocks outperforming bitcoin.
What’s the timeline for Morgan Stanley’s price targets?
Price targets typically represent 12-month forward projections. Morgan Stanley expects the bitcoin-to-data center transformation to drive gradual revaluation as contracts are signed and capacity comes online throughout 2026.
Which ETF offers highest exposure to Cipher and TeraWulf?
Grayscale Bitcoin Miners ETF (MNRS) offers highest combined exposure with Cipher at 10.37% and TeraWulf at 5.60%, though it has smallest AUM at $11M. For larger funds, Global X Blockchain ETF (BKCH) provides solid exposure with better liquidity.
