TeraWulf: High-Impact Business Pivot

Summary TeraWulf is rapidly transitioning into a high-performance computing Data Center provider, benefiting from surging AI-driven CapEx investments. WULF's landmark deal with Fluidstack in August, backed by Google, significantly boosts its revenue backlog and cements its role with Tier 1 ￰0￱ total value (based off of contracted value) of the Fluidstack deal now sits at $6.7B, following an option exercise shortly after the initial ￰1￱ not yet being profitable, WULF's strong top-line growth and expanding order backlog position it for a potential multi-year ￰2￱ WULF translates backlog into earnings, shares could see substantial upside, making it a compelling growth play on the AI infrastructure ￰3￱ of TeraWulf ( WULF ) have been on a tear in the last year, rising more than 244%, as the company’s business pivot to high-performance computing has started to see some real ￰4￱ is now building hundreds of megawatts in compute for the Data Center industry, establishing itself as a crucial cog in an industry that is seeing dizzying levels of spending from ￰5￱ AI Data Center player recently signed a landmark deal with Fluidstack, which works with some of the largest hyperscalers in the world, including Alphabet ( GOOG ).

The firm’s order backlog is growing, its top line is surging, and the outlook for TeraWulf is highly favorable in a market seeing severe GPU supply constraints… which is why I am buying into this promising AI-centric growth ￰6￱ by YCharts Previous rating I have not previously worked on TeraWulf but have developed a core investment thesis for Nvidia ( NVDA ) as well as other hyperscalers that have considerable exposure to the artificial intelligence ￰7￱ investment case for Nvidia has been condensed in my work – Why I Am Aggressively Accumulating At All-Time High – and essentially centers around the theme of escalating CapEx spending. Nvidia, other AI start-ups, and neoclouds all benefit from sizzling demand for GPUs to accommodate hyperscalers’ demands to run AI ￰8￱ seems to be well-positioned to benefit from building HPC-focused AI infrastructure and could have massive long-term revaluation potential… if CapEx spending doesn’t fizzle out and the company can move towards ￰9￱ growth play on growing Data Center spending, Fluidstack deal TeraWulf is part of a growing number of companies -- that include IREN ( IREN ) and Applied Digital ( APLD ) -- that have recently pivoted their business models from cryptocurrency mining to the provision of Data Center infrastructure that hyperscalers like Microsoft ( MSFT ) and Meta Platforms ( META ) need in order to scale their AI ￰10￱ provides hyperscalers with Data Centers that are purpose-built and provide liquid-cooled AI workloads...

and therefore are a critical element for hyperscalers to build their businesses ￰11￱ run advanced compute workloads, TeraWulf is custom-building a next-generation data center campus near Somerset, New York (the Lake Mariner HPC campus), and in Lansing, also in New York (the Cayuga/Lake Hawkeye campus). The total scalable infrastructure capacity for Lake Mariner is 750 MW, and for Lake Hawkeye it is 400 MW. TeraWulf's Data Centers are expected to ramp up their services, especially in FY 2026, and then incrementally add compute capacity in the following ￰12￱ TeraWulf recently signed a 10-year colocation agreement with Fluidstack, which builds and operates clusters of high-performance GPUs in order to support machine learning tasks and AI workloads for ￰13￱ deal accelerates the firm’s transition to becoming a full-fledged HPC infrastructure provider and has resulted in a considerable boost to investors’ already bullish outlook for ￰14￱ part of the deal, TeraWulf will provide a massive 250 MW of gross capacity at its Lake Mariner facility in New York to ￰15￱ the first phase, 40 MW of this total agreement is expected to be deployed in the first half of next ￰16￱ deal, according to TeraWulf’s press statement , has a contract value of $3.7B, but Fluidstack has two five-year extension options that would significantly expand the contract value.

A short while after the deal announcement in August, Fluidstack exercised this option to expand the Lake Mariner campus, with operations expected to commence in the second half of the ￰17￱ expansion deal boosted the firm’s order backlog to $6.7B. Most importantly, as part of the expansion deal, Google, which is a client of Fluidstack, will backstop the firm’s lease obligations to the tune of $3.2B and receive warrants equal to ~14% of TeraWulf’s ￰18￱ deal is significant in a number of ways and clearly a major win for TeraWulf… which is still very much in the process of pivoting its ￰19￱ HPC deal obviously accelerates TeraWulf’s transition to becoming a data center platform, and with Google backstopping lease payments, the revenue backlog that is developing in the company’s portfolio is of very high quality.

Further, the deal expansion itself highlights strong pent-up demand for Data Center capacty and helps the company establish itself as an HPC platform of choice for Tier 1 hyperscalers. This, of course, could create significant deal and revenue momentum with other Tier 1 companies as well, such as Microsoft, Meta Platforms, or ￰20￱ growth momentum likely to continue... In the second quarter, TeraWulf generated $47.6M, showing 34% year-over-year growth. TeraWulf, however, is not yet profitable and therefore still needs to prove to investors that it can deploy its Data Center assets ￰21￱ Q2 2025, TeraWulf’s generated a net loss of $18.4M, marking an increase of 69% compared to the year-earlier period.

However, as the company deploys more MW and potentially signs more deals with other hyperscalers, there is a solid chance for a material multi-year revenue and backlog ￰22￱ by YCharts TeraWulf’s valuation The Data Center provider is valued at a price-to-revenue ratio, on an FY 2026 earnings basis, of ￰23￱ to the historical three-year average P/S ratio of 4.5X, this is a high multiplier, but TeraWulf is seeing strong top line expansion and deserves credit for landing a landmark deal involving Google... which could drastically accelerate the firm's growth in the years ￰24￱ like IREN and Applied Digital are trading at P/S ratios between 7.7X and 18.2X, which makes an investment in TeraWulf still appealing, in my ￰25￱ Digital just reported strong results, and the company has positioned itself to benefit from growing AI adoption and integration in the business ￰26￱ TeraWulf, Applied Digital could be a major winner for investors if CapEx spending doesn't dry out in the years ahead: A Strong Play On The AI ￰27￱ industry group average price-to-revenue, including the three crypto-turned-Data Center plays below, is 13.6X.

However, investors are willing to pay massive premiums for companies that can deliver strong results in terms of expanding their businesses and cashing in on the AI boom. I definitely see TeraWulf trading at an Applied Digital-like P/S ratio in the future, which would imply a fair value in the neighborhood of ~$19/share. Data by YCharts Risks with TeraWulf TeraWulf is a relatively small Data Center operator with a market cap of only $6.3B that provides high-performance computing platforms for hyperscalers and the enterprise and is not yet ￰28￱ that companies like OpenAI have said they are going to drastically ramp up AI spending in the years ahead, I believe the risk of overspending in the Data Center market is still quite low at this ￰29￱ would change my mind about TeraWulf, however, is if the enterprise were to see a rollback of AI-driven Data Center investments (against my expectations) or if TeraWulf failed to expand its critical Lake Mariner campus in New ￰30￱ inability to translate a surging backlog and top line into actual earnings going forward may also affect my rating ￰31￱ thoughts TeraWulf is focused on building out its Data Center platform, which offers investors an opportunity to play the ramp in AI-led CapEx ￰32￱ last month said that it struck a $100B investment deal with Nvidia, which is part of the company’s effort to ramp up its Data Center footprint and invest up to $850.0B into its server infrastructure in the next several ￰33￱ investments in AI infrastructure ramping up and hyperscalers like Google and others desperate for Cloud computing capacity to run their AI models, TeraWulf is in a strong position to grow its top line rapidly in the ￰34￱ this growth can be transformed into actual earnings growth, I can see a strong upside revaluation case for TeraWulf.

Further, the firm’s ability to sign a multi-billion, long-term lease deal with Fluidstack (and a successive multi-billion-dollar expansion deal) are signs that TeraWulf’s business pivot has already started to make a major impact on the firm’s trajectory. I like the growth story here and initiate shares of TeraWulf as a buy.