Musk Warned About Stranded Data Centers, and This AI Landlord’s CEO Fired Back

AI infrastructure stocks have been getting whacked by every funding scare that hits the headlines, and Elon Musk just served up a fresh one. 

A former bitcoin miner shrugged it off with a 20-year lease, a gigawatt of contracted power, and an anchor tenant that just filed to go public. Today we break down why the selloff looks overdone.

TeraWulf (NASDAQ: WULF) is sitting near the bottom of its 52-week range after a brutal month. Funny timing, because its book of signed contracts keeps getting bigger.

If you still think of TeraWulf as a bitcoin miner, you’re a few chapters behind. The company has been turning its power-rich sites into data centers it leases to AI and high-performance computing customers.

Its Lake Mariner campus in New York is already up and running, and its Kentucky projects are where the big money gets made. The market is treating it like a speculative crypto play. The contracts tell a very different story.

The CEO picked a fight and won the day

TeraWulf (NASDAQ: WULF) rallied hard to kick off the week after its CEO publicly took on Elon Musk. Musk had warned that “a lot of stranded compute in partially complete data centers” is coming, which is exactly the fear that has been hammering AI builders.

Paul Prager’s response was blunt. “We may move dirt early, but we don’t build on spec,” he wrote.

TeraWulf locks in power, fixed-price construction contracts, long-term tenants backed by investment-grade credit, and financing before major construction begins.

As Prager put it, “What others call stranded assets, we may call a development pipeline.” The company also expanded its credit facility late last week, giving it more borrowing room for the buildout.

What management expects next

The headline project is the Justified Data Campus in Kentucky, anchored by a 20-year lease with Anthropic, with deliveries starting late next year.

Regulators have already approved the power agreement behind it, which removes one of the biggest hurdles any data center faces.

Next door at the Muskie Data Campus, TeraWulf doubled its contracted power to 1 gigawatt and pulled forward the second phase of the build.

Earnings arrive early next month, and that call gives management its first chance to walk you through the pipeline since the selloff started.

A 20-year lease with an AI heavyweight

The Anthropic lease is the backbone of this story. It anchors a multibillion-dollar data center project and comes with options to extend it even further. That’s two decades of contracted revenue, signed and sealed, before the first server even switches on.

Leases like this are the cure for the stranded asset fear. A building with a signed, long-term tenant works more like a toll road with a customer already paying for the lanes.

The tenant just filed to go public

Anthropic just filed for an IPO. For TeraWulf, that means its anchor tenant is heading for a bigger stage, a bigger war chest, and every reason to keep its data center plans on schedule.

When someone online questioned whether Anthropic would honor the lease, Prager didn’t hedge. “They invest billions in the data center. Not walking away. No chance.” A tenant pouring its own money into a facility is about as committed as tenants get.

A gigawatt in Kentucky

Every AI data center needs enormous amounts of electricity, and locking it in early is half the battle. TeraWulf’s amended deal with Kentucky Power doubled the Muskie campus to 1 gigawatt, and the site has room to grow even bigger over time.

That puts TeraWulf in the conversation as a major U.S. hub for AI computing. Owning the power means owning the bottleneck, and the bottleneck is where the pricing power lives.

A pipeline instead of a pile of concrete

TeraWulf has an earlier-stage project in Maryland too, the Chesapeake Data Campus, on top of its Kentucky and New York sites. Under Prager’s sequencing, those sites only become big construction projects once power, tenants, and financing are lined up.

That discipline is what separates TeraWulf from the builders the market is worried about. You’re getting a pipeline of future campuses with the risk managed up front, rather than a stack of half-finished shells waiting for someone to rent them.

The targets tell the story

The average analyst price target sits at more than double where the stock trades, and the overwhelming majority of analysts covering it rate it a buy.

Morgan Stanley raised its target and said the recent pullback is disconnected from the value of TeraWulf’s contracts.

Cantor Fitzgerald trimmed its target but kept its Overweight rating and called the stock a potential “generational buy” once AI funding fears cool off. TD Cowen, Jones, and UBS have all started coverage with Buy ratings.

When that many desks agree, and the stock still sits near its lows, the market is reacting to mood rather than math.

Big money is already in

BlackRock took a hefty brand-new stake in TeraWulf, and a TeraWulf director recently added to his own position. The company also holds billions in cash, an expanded credit line, and its CEO has pledged to avoid diluting shareholders.

Put that together, and you get a builder with the funding cushion to get through the construction phase, which is exactly where the skeptics think it will stumble.

TeraWulf’s trailing revenue is tiny next to its market value, and the stock trades at a sky-high multiple of sales compared with its peers.

Its latest quarterly revenue even slipped from a year earlier. On a screener, that looks like a company priced for perfection.

Look at what that revenue measures. It mostly reflects the legacy bitcoin business and early computing operations, before the big AI leases start paying.

The Anthropic campus doesn’t begin delivering until late next year, and the Kentucky expansion comes after that.

Today’s revenue is the “before” picture. The leases already signed are the “after,” and the price-to-sales ratio shrinks fast once those checks start clearing.

Execution is the big one. Building data centers at this scale means juggling construction crews, power hookups, and equipment deliveries. Any delay pushes revenue out and gives the bears an opening.

The balance sheet is heavily leveraged, and analysts no longer expect TeraWulf to turn a profit anytime soon. If credit markets tighten or borrowing costs spike, funding the next phases gets harder, and the stock will feel it.

Sentiment is the wild card. AI infrastructure stocks swing violently on every headline about funding, chip demand, or a celebrity CEO’s late-night post.

This stock moves several times more than the broader market, so expect a bumpy ride even if the business does everything right.

TeraWulf has a 20-year lease with an AI heavyweight, a gigawatt of contracted power in Kentucky, a build-only-when-funded playbook, and Wall Street targets well above where it trades. The market sold it alongside every AI builder on a funding scare it was designed to avoid.

I’d buy it here. The contracts are signed, the power is locked in, and the selloff hands you an entry near the bottom of the range.

What would change my mind is a major construction delay at the Anthropic campus or a funding hiccup that forces a big share sale. If the stock breaks and holds below $9, step back and reassess.

Entry zone: $10.50 to $13. Add on weakness toward $10. Target: $20 to $24 over 9 to 15 months. Confidence: high.

Looking to buy? Start a position in the $10.50 to $13 range before earnings early next month. Keep your size reasonable, because this stock swings hard in both directions.

Already own it? Hold. On the next call, listen for construction progress at the Kentucky campuses, any draws on the expanded credit line, and new tenant signings.

Main risk to respect: A construction delay or funding squeeze would hit this stock fast. Size your position so a rough week doesn’t shake you out.

That's our coverage for today; thanks for reading! Reply to this email with feedback or any value stocks you want me to check out.

Best Regards,
—Noah Zelvis
Undervalued Edge