SKN | Morgan Stanley Backs Cipher Mining and TeraWulf, Downgrades Marathon as Bitcoin Miner Coverage Begins

Morgan Stanley has kicked off coverage of U.S.-listed bitcoin miners with a clear message: not all mining companies should be valued as leveraged bets on bitcoin’s price. In a new research note, the bank argued that some mining operators are evolving into infrastructure-style businesses with more predictable cash flows — a distinction that underpins its bullish stance on Cipher Mining and TeraWulf, and its more cautious view on Marathon Digital.

The initiation comes at a sensitive moment for the sector, as bitcoin trades near $70,000 and investors reassess whether mining equities still offer attractive risk-adjusted returns after years of volatile profitability and heavy capital spending.

Infrastructure Versus Pure Bitcoin Exposure

Morgan Stanley analyst Stephen Byrd and his team initiated coverage of Cipher Mining and TeraWulf with Overweight ratings, assigning price targets of $38 and $37, respectively. Shares of both companies jumped more than 12% on Monday following the report.

By contrast, the bank began coverage of Marathon Digital with an Underweight rating and an $8 price target, signaling skepticism about the sustainability of returns from a mining-first strategy. Marathon shares hovered just above that level in early trading.

At the heart of the analysis is a reframing of how certain mining assets should be valued. Morgan Stanley contends that once a mining company has developed a data center and secured a long-term lease with a creditworthy counterparty, that asset begins to resemble infrastructure rather than a speculative crypto operation. In that scenario, the relevant investor base shifts away from bitcoin traders toward long-term infrastructure investors seeking stable, contracted cash flows.

The “REIT Endgame” for Cipher

Cipher Mining sits at the center of this thesis. Byrd described the company’s data centers as candidates for what he called a “REIT endgame,” where assets are ultimately valued like contracted infrastructure rather than volatile mining operations.

He compared these facilities to large data center real estate investment trusts such as Equinix and Digital Realty, which trade at more than 20 times forward EBITDA thanks to their scale, diversification, and steady growth. While Morgan Stanley does not expect bitcoin-developed data centers to command similar multiples, it argues that the market is undervaluing the stability of contracted data center cash flows.

In a scenario where Cipher transitions a site from self-mining to leasing space to a cloud or high-performance computing customer, the economics change materially. Bitcoin price sensitivity fades, and revenues begin to resemble those of a toll road — predictable, long-dated, and less cyclical.

TeraWulf’s Power and Data Center Strategy

TeraWulf earned a similar endorsement based on its track record of signing data center agreements and its management team’s background in power infrastructure. Byrd estimates that sites without bitcoin-to-data-center contracts could be converted at a present value of roughly $8 per watt.

His base case assumes the company successfully converts about half of its planned annual data center growth of 250 megawatts between 2028 and 2032. In a more optimistic scenario, that success rate rises to 75%, significantly lifting the firm’s long-term valuation profile.

The emphasis on power expertise and contract-driven growth positions TeraWulf, in Morgan Stanley’s view, as a hybrid infrastructure developer rather than a pure-play miner.

Why Marathon Lags

The tone shifts sharply with Marathon Digital. Byrd argued that Marathon’s hybrid approach — combining mining with selective data center ambitions — leaves it far more exposed to bitcoin price swings. The company’s strategy of maximizing bitcoin exposure, including issuing convertible debt to buy bitcoin, reinforces that risk profile.

Marathon’s limited history of hosting third-party data centers also weighed on the assessment. “For MARA, bitcoin mining economics are the dominant driver of the stock’s value,” Byrd wrote, adding that the historical return on invested capital in bitcoin mining has been unattractive.

A Selective Bet on the Sector

Morgan Stanley’s coverage highlights a broader debate playing out across the industry: whether bitcoin miners can evolve into power and computing landlords as mining margins compress. The bank’s answer is selective. Where miners secure long-term leases and infrastructure-like cash flows, it sees valuation upside. Where mining remains the core business, it sees fewer reasons for optimism.