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Learn moreRothschild & Co Redburn initiated coverage of TeraWulf (NASDAQ: WULF) at Neutral on Monday, setting a $15 price target. The target is $2.01 below the reported $17.01 reference share price, implying 11.8% downside.
The firm valued TeraWulf using a discounted cash-flow model with a 23% cost of equity and an 8% cost of debt. Additional U.S. capacity acquisitions and broader tenant signings could create upside, whereas construction could be delayed by permitting problems and state-level opposition.
Rothschild Redburn remains bullish on generative AI infrastructure demand but said credit markets are beginning to reflect risks that equity investors overlook. The firm said hyperscaler leverage appears higher once commitments kept off balance sheet are counted, potentially limiting support for another phase of infrastructure investment.
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TeraWulf generated $31.9 million in HPC lease revenue in the second quarter, which represented approximately 71% of its $44.8 million total revenue. Following delivery of CB-3 in early July, 102 MW of Lake Mariner's critical IT capacity was online and generating revenue.
Another 336 MW of critical IT capacity is under construction at Lake Mariner through CB-4 and CB-5. TeraWulf expects WULF Compute's construction costs to run between $8 million and $10 million per critical IT MW.
The operator has also entered into a 20-year Anthropic lease covering approximately 401 MW of critical IT capacity at its Justified campus in Kentucky. Over the initial term, the arrangement represents about $19 billion in contracted revenue, rising to as much as $33 billion if Anthropic exercises both five-year extensions.
Kentucky regulators approved electric service of up to 482 MW for Justified in August. The Anthropic lease calls for initial delivery in the second half of 2027 and full delivery in early 2028.
Rothschild Redburn's target is below several recent analyst valuations. Rosenblatt left its Buy rating and $30 target unchanged following second-quarter results, although it cut its 2026 revenue forecast and moved its adjusted EBITDA estimate into negative territory.
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TeraWulf ended the second quarter with approximately $3 billion in cash and restricted cash. It reported negative adjusted EBITDA of $18.3 million as spending continued on its contracted developments.