Cipher Digital signs new 15-year deal with hyperscaler
Cipher Digital (CIFR) announced on Wednesday that it has entered into a 15-year agreement with an investment-grade hyperscaler to deliver high-performance computing (HPC) services.
Cipher, which builds industrial-scale data centers for HPC, has now signed deals with three hyperscalers. The company started as a bitcoin miner, but has now pivoted to AI infrastructure and HPC services.
This pivot included rebranding itself last year from Cipher Mining to Cipher Digital. The company also sold a 49% interest in 40 MW joint venture sites as well as bitcoin mining machines to Canaan Inc. (CAN) for $40 million in an all-stock transaction.
Cipher described the deal with Canaan as a way to maintain "optimized exposure to the bitcoin mining industry in a capital-light manner, and accelerate the strategic transition" to HPC services.
The company did not identify the hyperscaler who signed the latest deal, but its previous two HPC contracts signed last year were a 15-year 300 MW lease with AWS and a 10-year 300 MW lease with Fluidstack and Alphabet's Google (GOOG).
Cipher also did not disclose how much HPC capacity it would be providing the hyperscaler as part of the new 15-year agreement, but said that it would deliver a new HPC data center at one of its existing sites.
“This agreement for our third large AI campus reinforces Cipher’s position as a trusted partner to develop high-quality HPC data center infrastructure for the world’s leading companies,” Cipher CEO Tyler Page said in a statement.
Clear Street analyst Brian Dobson reiterated his Buy rating on CIFR shares in a client note on Wednesday, seeing its multiple HPC deals as a signal that it is one of the leaders among the companies that have made the pivot from bitcoin mining to AI/HPC.
"Despite a volatile macro, this announcement reinforces our positive thesis on both CIFR and AI/HPC demand," Dobson said. "However, we note that among our miners, we are seeing increasing bifurcation between those with multiple deals announced, and those who have yet to announce their first."
Citizens analyst Greg Miller initiated coverage on Cipher in November with an Outperform rating, noting that he was bullish because among its bitcoin miner peers, he sees them as having an "early-mover advantage in large-scale HPC capacity with long-term monetization upside."
The company is currently constructing data center sites called Barber Lake and Barber Pearl in Colorado City, Texas.
CIFR's shares rose 6.7% on Wednesday.
Rosenblatt analyst Chris Brendler reiterated his Buy rating on Cipher, noting that a recent meeting with Page and CFO Greg Mumford led Rosenblatt to come away "increasingly confident in our recent optimism on the stock."
"Despite significant progress on HPC data center construction and funding the required capex, CIFR shares have continued to lag peers, but we are convinced this relative weakness is a compelling buying opportunity," Brendler said.
He added that with "a new hyperscaler contract acting as a key near-term catalyst for the stock, we continue to view CIFR at current levels as the best way to play the HPC opportunity."