UBS Gives AI Hosting Stocks Thumbs Up with Buy Ratings

UBS Group has initiated coverage on five Bitcoin mining companies that are pivoting to AI data center hosting. All five companies have been assigned a 'Buy' rating by UBS, with an average upside potential of 36%. The rationale behind this rating is the rare advantage these companies have in accessing affordable electricity and upgrading tenant creditworthiness.

The five companies - Hut 8 (HUT.US), TeraWulf (WULF.US), Applied Digital (APLD.US), Core Scientific (CORZ.US), and Cipher Digital (CIFR.US) - collectively hold 4.8 GW of leased capacity, with an additional 12 GW in the expansion pipeline. However, the market currently only values contracted assets.

According to UBS analyst Ryan Gravett, AI infrastructure is expected to add roughly 260 GW of capacity between 2028 and 2030 - three times the approximately 90 GW of new capacity added between 2025 and 2027. This supply-demand imbalance has led UBS to estimate significant upside potential in the target prices for the five companies.

The target prices are: Hut 8 (HUT.US) at $143, representing a 45% upside from its September 18 closing price of $99; TeraWulf (WULF.US) at $24, up 41% from $17; Applied Digital (APLD.US) at $38, up 35% from $28; Core Scientific (CORZ.US) at $24, up 33% from $18; and Cipher Digital (CIFR.US) at $23, up 25% from $18.

UBS believes that the discount in the valuations of these companies primarily reflects market concerns about execution risks, tenant concentration, and uncertainties surrounding renewals in non-traditional markets. However, the company notes that optimizing the tenant mix is another key factor underpinning valuation recovery.