Bernstein: Core Scientific’s 75% AI ROA Driven by Capex

Bernstein analysts Madison Rezaei and Gautam Chhugani wrote in a Wednesday note that Core Scientific’s reported 75% five-year average return on assets and a 79% yield on cost from its CoreWeave AI colocation deal reflect an unusual financing arrangement rather than typical mining economics.

The firm calculated Core Scientific effectively expended about $1.5 million in capital per IT megawatt on the 590 MW committed to CoreWeave. CoreWeave prepaid roughly $750 million of the $855 million project cost, leaving about $105 million on Core Scientific’s balance sheet. Bernstein said that financing split reduces the company’s recorded capital and raises reported returns on asset measures compared with a standard asset-level comparison.

Riot Platforms appears as another outlier. Bernstein found Riot’s five-year average ROA at about 23% and a 29% yield on cost after the company spent an incremental roughly $3.5 million per IT megawatt to retrofit existing bitcoin facilities.

The analysts wrote that such capex-advantaged arrangements are limited and do not reflect the broader economics for firms converting mining capacity to AI colocation. ‘We believe such capex advantaged deals are limited and do not reflect the overall economics of emerging AI infra players,' they wrote.

Bernstein presented lower, more typical returns for miners moving into AI colocation. TeraWulf’s figures sit near a 5% ROA and a 19% yield on cost. Cipher and CleanSpark each register around a 4% ROA and a 17% yield on cost.

Capital expenditure differences account for much of the spread. Bernstein estimates TeraWulf’s capex advantage at about $8 million to $10 million per IT megawatt because its brownfield industrial sites already have power and transmission. Cipher’s capex range is roughly $9 million to $11 million per IT megawatt.

Cipher offsets higher capital needs with operating efficiency. Bernstein reports Cipher’s blended EBITDA margin near 94%, versus about 85% for TeraWulf. The firm links Cipher’s higher margin to triple-net lease terms that place power, taxes and other operating costs on the tenant and raise net operating income margins.

Revenue yields vary by contract. CleanSpark’s 20-year lease for 175 IT megawatts in Sandersville, Georgia, carries roughly $1.9 million in average annual revenue per IT megawatt. TeraWulf’s 20-year agreement with Anthropic yields about $2.4 million per IT megawatt under similar triple-net terms. Bernstein noted Cipher’s repeat contract with AWS lifted its revenue yield to $1.9 million per IT megawatt from $1.7 million.

Across the colocation deals Bernstein tracks, unlevered internal rates of return range from about 8% to 13%, compared with prevailing financing costs of roughly 6% to 7%. The analysts prefer yield-on-cost at the asset level over ROA, which they say can be distorted by differing depreciation policies, varying definitions of when assets are ‘stabilized,' and diverse capex structures.

Bernstein contrasted miners’ concentrated, hyperscaler-anchored rural sites with large data-center operators that run hundreds of stabilized facilities in major metropolitan markets. The firm rates the sector Outperform and set price targets of $36 for TeraWulf, $32 for Cipher, $32 for Core Scientific, $30 for Riot and $24 for CleanSpark; Marathon Digital is Market-Perform at $17. Bernstein added that the roughly 7 GW of miner capacity contracted to date is less than a quarter of the roughly 30 GW pipeline miners have planned.