UBS Initiates Coverage on Five AI Data Center Stocks, Citing 36% Average Upside

UBS has initiated coverage on five AI data center colocation stocks with Buy ratings, seeing an average upside potential of 36% as the artificial intelligence boom strains computing capacity. The bank's bullish outlook is rooted in the companies' unique access to electrical power, a critical bottleneck for the rapidly expanding AI industry.

The Power-Driven Thesis

According to a September 22 research note from UBS analyst Ryan Gravett, access to power is the primary limiting factor in scaling the infrastructure needed for AI. The five companies, which have backgrounds in cryptomining, possess favorable access to the power grid that has already secured them approximately 5 gigawatts of leased capacity. This represents roughly $125 billion in contracted revenues, the note stated.

UBS forecasts that this strategic advantage will fuel significant growth. The bank projects an average annual EBITDA growth of approximately 80% for the group from 2027 to 2029, a figure about 10% higher than consensus estimates for 2029. This initiation comes after the stocks have fallen an average of 45% from recent highs, creating what UBS views as an attractive entry point.

Ad

Stock-Specific Ratings

UBS issued the following specific ratings and price targets, highlighting distinct advantages for each company:

• Hut 8 Corp (HUT): Buy rating with a $143 price target (45% upside). Cited for its strong pipeline, track record, and high-quality tenants.
• Terawulf Inc (WULF): Buy rating with a $24 price target (41% upside). Differentiated by its ability to convert industrial brownfield sites near population centers.
• Applied Digital Corp (APLD): Buy rating with a $38 price target (35% upside). Noted for its substantial 1.3-gigawatt backlog and potential for a REIT conversion.
• Core Scientific Inc (CORZ): Buy rating with a $24 price target (33% upside). UBS believes it trades at an unwarranted discount to peers despite a diverse footprint and proven execution.
• Cipher Mining Inc (CIFR): Buy rating with a $23 price target (25% upside). While trading at a premium, UBS sees near-term leasing opportunities that could boost contracted capacity by about 70%.