TeraWulf's (WULF) 90% Rally Leaves Analysts Speechless

Business Insider

12 hours ago

TeraWulf (WULF) shares surged 90% last week after Alphabet (GOOGL) expanded its investment and the company secured a major AI hosting contract with Fluidstack. The AI infrastructure boom is creating powerful new opportunities, and TeraWulf's pivot from pure-play crypto mining to AI infrastructure positions it well to benefit.
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That said, while the news has fueled strong momentum—and momentum often feeds on itself—valuation remains a concern. Persistent losses and the stock's sharp run-up call for caution. For now, I prefer to wait, let the dust settle, and watch closely how effectively TeraWulf scales its AI hosting business and drives toward sustainable profitability.
Transitioning From Bitcoin Mining to AI Infrastructure
TeraWulf runs bitcoin mining operations alongside high-performance computing (HPC) hosting services, powered mainly by zero-carbon energy sources at its flagship Lake Mariner facility in New York, a repurposed coal plant, which positions the company to scale up to 750MW of capacity. This energy source provides both cost advantages and ESG appeal, potentially making it a preferred partner for environmentally conscious tech giants.
The company has been moving away from pure Bitcoin mining toward AI and HPC hosting, a strategic shift that has picked up pace recently, with Google expanding its stake from 8% to 14% and increasing its total financial backstop to $3.2 billion.
Further, TeraWulf has expanded its partnership with Fluidstack, an AI cloud provider, to 360MW of total capacity through multiple 10-year contracts. These deals represent potentially $6.7 billion to $16 billion in contracted revenue, with operations expected to begin in the second half of 2026.
This revenue backlog offers visibility for ongoing growth, reducing uncertainty about future cash flows, provided TeraWulf can successfully execute its expansion plans while maintaining operational efficiency.
WULF's Financial Results Show Strategic Progress
TeraWulf showed progress toward improvement in the second quarter of 2025. Revenue jumped to $47.6 million, representing 34% year-over-year growth, driven by a combination of higher bitcoin prices and the early contributions from new HPC hosting revenue streams. The company also surprised investors with earnings per share of -$0.05, beating expectations of a $0.06 loss.
However, challenges remain. The company's Bitcoin mining capacity has grown to 12.8 EH/s (up 45.5% year-over-year), but after the most recent 'halving,' the cost pressures for mining have intensified. Despite operational improvements, TeraWulf still reported a net loss of $18.4 million for the quarter.
Management has set ambitious targets, projecting average revenue growth of 41% annually over the next three years, which reflects confidence in a successful transition to AI hosting (but also highlights the substantial execution risk to the company should they miss their targets).
Finally, TeraWulf has recently announced a $400 million convertible note offering, which further provides necessary capital to fuel its ambitious growth, but could dilute existing shareholders.
Valuation and Momentum
The company trades at a trailing price-to-sales ratio of 25x, significantly more than the sector average of 3.27x, and more than twice its competitors, such as Cipher (CIFR) (13.5x), IREN (IREN) (11x), and Core Scientific (CORZ) (13x). This relatively rich premium valuation assumes flawless execution in a capital-intensive business where a key input to value (cryptocurrency) is notoriously volatile.
However, price momentum is strongly bullish. The stock currently trades above its major moving averages, a trend that can persist for some time.
That said, with a beta near 3, the stock remains highly volatile and sensitive to shifts in broader market sentiment around AI and crypto. Any pullback in AI enthusiasm or heightened regulatory scrutiny could weigh heavily on the share price.
Is TeraWulf a Good Investment?
Analyst sentiment has been generally positive. The stock carries a Strong Buy rating from TipRanks, based on 10 Buy and one Hold analyst recommendations. WULF's average 12-month stock price target of $11.55 represents an upside of 20% from current levels.
Most recently, Cantor Fitzgerald's Brett Knoblauch raised his price target on WULF to $14 (from $11) while maintaining an Overweight rating on the shares, noting the Fluidstack deal driving average annual EBITDA of more than $600M, and Google financing accelerating TeraWulf's path to contracting all of its capacity.
Final Thoughts on TeraWulf
TeraWulf is well-positioned to ride the wave of the AI infrastructure revolution. The Google partnership and Fluidstack contracts provide strong validation of the company's strategic direction and infrastructure quality.
However, stretched valuations, ongoing losses, and execution risks are a concern. The company's success will ultimately depend on its ability to execute its ambitious expansion plans while maintaining operational efficiency and improving its profitability.
I am inclined to wait for more unmistakable evidence of sustained profitability and more reasonable valuation metrics before considering a position.