By Avi Salzman

Bitcoin prices have fallen 44% since October, but Bitcoin miners have found a new lease on life -- as AI data centers. It's a trend that's already lifted several Bitcoin miner stocks over the past two years, but it's far from over, says Morgan Stanley analyst Stephen Byrd. He thinks at least two stocks in the industry could more than double over the next year.

Byrd initiated coverage on Terawulf and Cipher Mining on Monday, projecting that they can rise 159% and 158% respectively. Both stocks rose by double-digit percentages on Monday, even though the price of Bitcoin was down.

It isn't like these companies have been in the dumps lately. Terawulf has already tripled in the past year, and Cipher is up by nearly that much.

But Byrd thinks their run is far from over, because their most important asset isn't the crypto they earn -- it's their access to electricity. It takes a lot of electricity to power the computer chips that mine Bitcoin, and Bitcoin miners went through the trouble of hooking up to the grid and finding ways to lower their electricity bills. AI companies are scrambling to find enough electricity for their machines too, and have shown a willingness to pay up to secure that power. Bitcoin miners that can retool their warehouses to serve as AI data centers have signed contracts to earn premium returns from tech companies, Byrd said in an interview. The economics of AI would be better than crypto mining even if the price of Bitcoin was going up instead of down.

"There's a fundamentally better story" in AI data centers, Byrd said. "That was still true even six months ago when Bitcoin was a lot higher."

Tech companies are running out of easy options to get power. Despite efforts to fund their own power plants, it still looks like they will end up nine to 18 gigawatts short of power by 2028, Byrd said -- equivalent to 10 to 15 nuclear reactors.

That makes them open to partnering with Bitcoin mining sites, which have already gone through the trouble of securing access to power. Terawulf has already made deals for 510 megawatts of power with companies like Google, and Cipher has a similarly large pipeline of deals, with partners like Amazon.

Byrd says the economics have lately gotten even better for Bitcoin mining companies who have been able to sign deals of 15 years or more with tech companies for power. That makes their stocks more like real estate investment trusts than risky crypto enterprises.

Not all miners will do well. Byrd also initiated coverage of MARA Holdings with an Underweight rating. He thinks the company's strategy isn't focused enough on maximizing its AI opportunity, and it's also looking to add more Bitcoin to its balance sheet.

Write to Avi Salzman at avi.salzman@barrons.com

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February 09, 2026 18:30 ET (23:30 GMT)

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