Democrat Gina Hinojosa defeated incumbent Republican Greg Abbott in the Texas gubernatorial race amid Tuesday's U.S. midterm elections. The state has become a battleground for AI data centers where around 25% of national construction is underway, according to analysts at Bernstein, who slashed their price targets for multiple firms following the result.
Bernstein cited uncertainty on pipeline approvals and higher cost of capital in the current financing market, reducing its price target for IREN to $55 from $100, Riot Platforms to $18 from $35, and Cipher Mining to $15 from $23. It also lowered TeraWulf to $20 from $36, CleanSpark to $11 from $24, Core Scientific to $19 from $32, and MARA to $10 from $17.
"We believe, under Abbott, the market was expecting a restoration of normalcy post-elections, which would mean the data center pause would be lifted subject to certain audit conditions," Bernstein analysts led by Gautam Chhugani wrote in a Wednesday note to clients. "However, with the Democrat win, we would expect the data center pause to continue and any data center potential legislation to remain in gridlock."
Across the research and brokerage firm's coverage, bitcoin miners-turned-AI-infrastructure developers have a power portfolio concentration of more than 50% in Texas alone for their approved and pipeline deals, the analysts said. IREN, Riot Platforms, and Cipher Digital are most exposed to state policy, but also have considerable approved gigawatt capacity, they added.
"The new Governor's laid-out policy is not very different in demanding data centers provide more to the community (pay for power, water, jobs for the community, etc.)," Chhugani said. "Thus, immediate reaction would be negative for projects relying on future interconnect pipelines, but maybe good for projects with approved power with credible developers meeting certain state conditions before commencing construction."
Many of the names have given back their pre-election AI gains and are trading nearer levels when they were pure-play bitcoin miners, Bernstein noted. Nevertheless, the analysts maintained their Outperform rating on the majority of the firms, with MARA also held at Market Perform.
The analysts said the firms' valuations were trading at fairly undemanding multiples after the recent drawdown, with a median 22% discount to contracted net operating income. They also argued that their combined 6.5 GW of approved power capacity in the state could command a "scarcity premium" if supply from the interconnect pipeline is further throttled.
Bernstein said that as the former bitcoin mining-focused firms are real estate owners with power access, they're not exposed to the neocloud leverage risks the market has been concerned with, adding that their debt levels remain relatively conservative, with credit backstops from investment-grade tenants across hyperscalers and chip suppliers.
Riot and Hut 8 announce major Texas AI data center deals
Separately, Riot Platforms announced a 15-year, $28 billion lease with an unnamed frontier AI lab for 910 MW of critical IT capacity at its Corsicana campus in Texas. The deal brings Riot's total contracted data center revenue to approximately $38 billion.
Hut 8 also announced a second 352 MW lease at its Beacon Point AI data center campus in Texas, representing approximately $9.8 billion in additional contracted revenue over the initial term. The company also agreed to acquire two sites in West Texas with up to 230 MW of utility capacity, subject to final power approvals and infrastructure development.
Both companies also reported third-quarter earnings on Wednesday. Riot's revenue rose 1% year over year to $181.4 million, while net income fell to $4 million from $104.5 million. Hut 8 reported $71.1 million in revenue, down from $83.5 million a year earlier, though net income increased to $189.5 million, helped by unrealized digital asset gains.