Cipher Mining Stock Is Climbing. Google Backs Another Data Center Deal.

Cipher announced an expansion of $830 million to its computing agreement with Fluidstack. (Justin Hamel/Bloomberg)

Key Points

• Cipher Mining expands its computing agreement with Fluidstack by $830 million, adding 39 megawatts at its Barber Lake facility.
• Google will backstop $333 million of Fluidstack’s new lease obligations, supporting Cipher’s proposed debt issuance of the same amount.
• Cipher Mining shares rise sharply following the announcement, with the company’s stock up nearly 250% this year.

Shares of Cipher Mining surged Thursday after the data center operator announced an expansion of $830 million to its computing agreement with Fluidstack, an artificial-intelligence cloud platform. Alphabet’s Google is backing the deal.

Cipher will deliver an additional 39 megawatts of power to Fluidstack at its Barber Lake facility in Colorado City, Texas. The 10-year agreement includes two five-year extension options, which would bring the total contracted revenue to roughly $2 billion and $9 billion, respectively, for the entire lease.

Google will backstop $333 million of Fluidstack’s new lease obligations, supporting Cipher’s proposed debt issuance worth the same amount. Cipher will finance the data center expansion with the debt proceeds and $118 million of additional equity contributions, the company said. Google similarly agreed to backstop Fluidstack’s $6.7 billion deal with TeraWulf, a Cipher rival, in October.

Cipher shares rose 10% to $16.08 on Thursday. The company, which began as a Bitcoin mining operator, has risen nearly 250% this year, buoyed by its AI computing deals. Alphabet was up 2.3%.

In an initial 10-year deal announced in September, Fluidstack agreed to pay $3 billion to lease most of the capacity available at Barber Lake. Google backstopped $1.4 billion of that contract. Thursday’s announcement means Fluidstack will now lease Barber Lake’s entire 300 megawatt capacity.

“This deal seems to be a natural extension of the original agreement, but interestingly, the terms appear more favorable for Cipher,” wrote J.P. Morgan analysts Reginald L. Smith and Charles Pearce.

Cipher will earn a higher return on the computing load delivered in Thursday’s expansion than it will on the load Fluidstack purchased in the initial agreement, J.P. Morgan calculated. The company now has colocation agreements totaling 600 megawatts between Fluidstack and Amazon.com’s Amazon Web Services, the firm pointed out.

J.P. Morgan reiterated a Neutral rating and a $12 price target for Cipher shares.

While the Fluidstack expansion was more or less expected, Brett Knoblauch of Cantor Fitzgerald believes Cipher stock is still trading below the value of its deals, which would be $18 a share.

“This implies the market is still not pricing additional growth beyond these deals, which makes risk/reward for CIFR attractive here,” Knoblauch wrote, reiterating an Overweight rating and $26 target for the stock.

Write to Nate Wolf at nate.wolf@barrons.com