UBS provides bullish initiation to colocation stocks as data center capacity prepares to triple
UBS initiated coverage on colocation data center stocks, citing constrained AI compute supply and strong demand. The bank projects 80% annual EBITDA growth from 2027-2029 and values shares at 12-18x 2028E EBITDA. Companies mentioned include Core Scientific, Cipher Digital, Applied Digital, and Hut 8, with varying risks and opportunities noted.
How this was made
The 30-second read
Why it matters
The initiation provides fresh valuation multiples and growth forecasts, likely prompting short‑term buying interest.
Market read
Analyst initiation on niche AI‑infrastructure stocks adds new data points for sector allocation decisions.
What to watch
Potential supply‑chain constraints for power and cooling may limit capacity expansion.
Background
UBS released a new research note initiating coverage on several publicly traded colocation and crypto‑miner companies, citing AI compute supply constraints.
Ticker impact
UBS initiated coverage with a bullish view on Core Scientific, citing AMD partnership benefits and potential multiple expansion.
potential upside of 10-15% over the next weeks
UBS projects strong EBITDA growth and assigns a 12-18x 2028E EBITDA multiple, indicating a favorable valuation.
UBS highlighted Cipher Digital's risk from Texas concentration but noted long‑term platform expansion potential.
limited upside, 5-8% if expansion materializes
Risk factors may temper enthusiasm, but sector tailwinds remain.
UBS cited strong tenant pipelines and expansion for Applied Digital as a catalyst for growth.
potential 8-12% rally in the near term
EBITDA growth outlook and expansion opportunities support a higher valuation.
UBS mentioned expansion and strong tenant pipeline for Hut 8, noting it as a beneficiary of AI infrastructure demand.
possible 7-10% increase
Growth narrative aligns with sector trends, though public backlash risk remains.
Market effects
Bullish coverage may lift the broader colocation and crypto‑miner sector as AI compute demand is highlighted.
North American data‑center and mining stocks could see increased buying pressure.
Global AI infrastructure investors may re‑weight exposure toward listed colocation providers.
Counterpoint
Risks from regulatory scrutiny and concentration in Texas could outweigh growth prospects.
Key entities
- Research FirmUBS
Issuer of the bullish coverage note.
