Summary CIFR basically integrates Bitcoin mining with HPC hosting to reduce power costs using grid optimization. They have adopted a relatively aggressive expansion that now targets 2.6 GW capacity by 2027 through new facilities like Mikeska, Milsing, and McLennan. CIFR will eventually grow into a dual revenue model that blends core Bitcoin mining with evolving and more stable HPC data centers as a bet on AI computing. In my view, their operational efficiency, combined with strategic power management and low-cost Texas electricity, could give them a moat over time. This is why, even though rapid infrastructure expansion investments have been a headwind, their low-cost mining and growth prospects still make CIFR a compelling long‑term buy. Cipher Mining ( CIFR ) integrates Bitcoin mining with high-performance [HPC] hosting, leveraging grid optimization to effectively manage power costs. Currently, the company operates the fully owned 207 MW Odessa site and the joint venture sites Alborz, Bear, and Chief with 120 MW. The company plans to expand its infrastructure to achieve an ambitious 2.6 GW by 2027 with the development of new facilities. Still, the market has recently been volatile due to the emergence of the Chinese AI model DeepSeek , which also created concerns about BTC mining stocks with exposure to AI and HPC. But ultimately, I believe CIFR remains a high-beta play on Bitcoin, and in the long run, it's well-positioned to benefit from both AI and Bitcoin. This is why I reiterate my "Buy" on CIFR after the recent pullback. A Bitcoin Miner With An AI Spin Cipher Mining is basically an industrial-scale data center developer that functions as a Bitcoin miner and high-performance computing [HPC] hosting. The company owns and operates several facilities in Texas, with partners like WindHQ to collaborate in the expansion of its infrastructure. This essentially positions CIFR at the center of Bitcoin mining and commercial AI computing. Currently, their business model integrates revenue from Bitcoin mining as a core source of revenue. However, over time, the development of HPC data centers to support artificial intelligence and other compute-intensive applications will become a more important contributor. The third pillar of the company's strategy is grid optimization to effectively manage power consumption, which could translate into even better mining costs in the long run. Source: Presentation for Business Update - February 2025 CIFR's Bitcoin mining business also takes advantage of Texas's low-cost power, which turns off mining when electricity prices spike. This basically makes CIFR a very opportunistic consumer of electricity, which, in turn, improves its profitability. They're also increasing their mining capacity with the construction of the Black Pearl facility, which is actually progressing ahead of schedule. Currently, Black Pearl is expected to be powered and functional by Q2 2025. CIFR also acquired the 100 MW Stingray site to expand its mining operations, which is scheduled to be powered in Q2 2026. In total, these are part of CIFR's larger aims of more than doubling its capacity by 2027. Source: Capital Finance International As for its HPC business, CIFR focuses on acquiring new parcels that can be connected to the high-capacity grid. This includes the 337 acres adjacent to Barber Lake . The site is also already powered and ready for construction. These new parcels include conditions like a favorable climate for cooling efficiency and low-cost energy. I believe both of these factors will build a key competitive moat in mining over time. This is on top of having recently signed a Memorandum of Understanding [MOU] for an additional 500 MW of infrastructure. So, all in all, CIFR is a growth play in mining that's still in its early stages relative to its grander vision. Scaling Ambitions And Turbulent Markets Moreover, during their recent earnings call , management explained its expansion plans from its existing size to about 2.6 GW by 2027. Currently, the installed operations include Odessa, with a capacity of 207 MW. Additionally, Alborz, Bear, and Chief have a capacity of 120 MW as Joint Venture projects with WindHQ. In fact, this partnership structure allows them to share investment risks and expenses while also leveraging WindHQ's infrastructure and power procurement capabilities. Source: Presentation for Business Update - February 2025 In total, the recent additions planned for 2025 include 300 MW from Black Pearl and 300 MW from Barber Lake. And overall, their capacity will more than double from today with those new plants to approximately 927 MW. The growth in 2026 will be to the capacity of 1.0 GW with the new Stingray site. And by 2027, CIFR's expansion will include an additional Reveille facility with 70 MW. But the greatest addition will come with Mikeska, Milsing, and McLennan for another 1,500 MW. Note that these expansions will include Bitcoin mining and HPC hosting data centers. So, over the long run, CIFR will become increasingly more diversified rather than a pure play on Bitcoin. After the latest financial report, the market reacted negatively despite an increase in YoY revenue from $127 million in 2023 to $151 million in 2024. This growth in revenues was obviously correlated with the price of Bitcoin. However, CIFR's yearly GAAP net loss did increase from $26 million to $45 million. But note that this larger loss was largely due to the costs associated with their speedy infrastructure expansion. Source: Presentation for Business Update - February 2025 Additionally, I think the rise of DeepSeek has created some doubts about AI valuations in general, which also impacts CIFR's bet on AI as well. If DeepSeek makes AI cheaper, then it could also translate to lower demand for AI computing from companies like CIFR. While this is still speculative, it has nonetheless led to a selloff across computing companies like CIFR. But in my view, the demand for AI computing will continue to increase , and lower-cost models like DeepSeek will only make AI more accessible, not decrease its overall demand. Valuation And Risks From a valuation perspective, CIFR now trades at a $1.7 billion market cap, despite the recent 15.1% YTD drop. However, I think now there might be another good opportunity since the stock has fallen so much, and the underlying thesis remains intact. In fact, according to Seeking Alpha, CIFR is projected to generate $695.0 million in revenues by next year. Source: Presentation for Business Update - February 2025 That would price CIFR at a forward P/S of 2.5, which is actually cheaper than its peers' forward P/S of 3.0 . Moreover, CIFR is still on track to more than double its current capacity by 2027. If that materializes, then its revenues will likely follow suit, so I believe this pullback is probably a good entry for new investors seeking exposure to a high-beta play on Bitcoin. Source: Seeking Alpha Naturally, the main caveat to this bull case is that CIFR remains unprofitable at these levels. Even with the high bitcoin prices in Q4 2024 , the company managed to squeeze out just $18 million in profits out of the total $42 million in quarterly revenues. That seems a bit low since it would represent an annualized earnings potential of $72 million (assuming stable Bitcoin prices), which implies a relatively high P/E of about 23.6. But, it also shows a profit margin of approximately 42.9%, which, at larger scales, can become quite compelling. Suppose we assume a similar profit margin on its forecasted 2026 revenues. That implies $297.9 million in 2026 earnings. That could price CIFR at a forward P/E of 5.7, which is pretty cheap compared to its peers' forward P/E of 23.5. And the equation could become much more compelling if, by 2027, CIFR increases its capacity as much as they're expecting to do so. Source: Presentation for Business Update - February 2025 Naturally, such earnings are ultimately dependent on the price of the underlying commodity, in this case Bitcoin. Bitcoin reached all-time highs in Q4 2024, and it's not guaranteed that such levels will be revisited any time soon (if at all). And if the price of Bitcoin continues trending lower, then CIFR will probably follow in an even larger magnitude. We've already seen how an 8.6% YTD drop for Bitcoin translated into a 15.1% pullback for CIFR. Source: TradingView Conversely, if the price of Bitcoin makes new highs later this year, then CIFR will mostly behave like a high beta play on that price action. This is especially true since, by the end of this year, its capacity will be substantially greater. This is why CIFR's main risk remains the price of Bitcoin itself, but other than that, I think it's well positioned to benefit greatly if Bitcoin regains its bullish momentum later this year. Hence, the recent pullback seems like a good opportunity to add some CIFR shares if you remain bullish on Bitcoin in the long run. Conclusion Overall, I believe CIFR remains on track to achieve its expansion ambitions by 2027. While I accept that this is a high-beta play on the price of Bitcoin itself, I think the long-term bull case remains intact. If by 2027, CIFR's capacity more than doubles, then CIFR could become a cash cow during Bitcoin bull markets. And in bear markets, its HPC business could pick up the slack and help it offset the negative effects of a Bitcoin downturn. In my view, this is why CIFR can make a lot of sense for investors who remain bullish on Bitcoin at these levels. However, if you believe this is the start of a new bear market on Bitcoin, then you should probably stay away from CIFR (or short it) for now. But over the long term, CIFR's cheap Bitcoin mining costs of $19.5-$26.3 thousand per Bitcoin should give them ample room for maneuvering. Hence, I reiterate my "Buy" on CIFR.
