Hut 8 Shares Surge 14% on $7 Billion AI Infrastructure Pact With Anthropic, Fluidstack

Hut 8 (HUT) shares surged more than 14% in premarket trading after the energy infrastructure company announced a major partnership with Anthropic and Fluidstack to accelerate the deployment of AI data center infrastructure. The deal involves developing and delivering up to 2,295 megawatts (MW) of computing power across three tranches, with the first phase starting at Hut 8's River Bend campus in Louisiana. The agreement features a 15-year lease valued at $7 billion, supported by financial backing from Alphabet's Google according to Seeking Alpha

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The partnership is structured to deliver at least 245 MW of initial IT capacity, with expansion options that could bring the total to over 2.3 gigawatts. Fluidstack, which operates high-performance computing clusters, will leverage Hut 8's infrastructure to support Anthropic's AI development. The deal marks a strategic pivot for Hut 8, shifting its focus from crypto mining to high-performance computing and AI infrastructure according to Seeking Alpha.

Analysts and investors responded positively, with Benchmark raising its price target for HUT to $85, the highest on Wall Street. The firm highlighted the investment-grade financial backstop from Google and the embedded expansion options with multiple counterparties as key value drivers. Morgan Stanley also praised the transaction, calling it a "high water mark for deal economics" and estimating value creation at $17 to $19 per watt.

How Markets Reacted

Hut 8's stock price jumped 14% on Monday, closing at $50.39, driven by the optimism surrounding the AI infrastructure deal. Benchmark analyst Mark Palmer cited the potential for $17.7 billion in total contract value as a major catalyst, reinforcing the stock's appeal. The firm also noted that the partnership could shift Hut 8 from a crypto-focused entity to a digital infrastructure player with more stable cash flow according to Yahoo Finance.

The stock has surged 102% year-to-date, with the AI pivot seen as a major factor in its valuation. While some analysts caution against overvaluation, the market appears to be pricing in a successful execution of Hut 8's expansion plans. The stock now trades at a P/E of 23.4x, raising questions about whether the current valuation reflects perfect execution according to Blockonomi.

What Analysts Are Watching

Benchmark highlighted the embedded optionality in the partnership, with three tranches offering expansion opportunities across multiple counterparties. Anthropic has shown rapid growth, while Fluidstack has secured previous data center deals with crypto miners, backed by Google. The investment firm also noted Hut 8's ownership stake in American Bitcoin as an added upside according to Blockonomi.

Morgan Stanley analysts described the deal as a model for future AI infrastructure transactions, emphasizing the allocation of risks and the growing demand for data center capacity. The firm estimated the total value of the River Bend campus at $7.6 billion and sees potential for further growth if AI computing demand continues to expand according to Seeking Alpha.

Risks to the Outlook

Despite the bullish outlook, risks remain for Hut 8. A decline in Bitcoin prices could pressure its legacy mining operations. Regulatory actions related to fossil-fuel-based power generation also pose a challenge to expansion plans. The company is heavily dependent on the growth of high-performance computing demand, which, if it fails to meet expectations, could impact its valuation and stock performance according to Blockonomi.

Additionally, some analysts argue that the current valuation appears stretched, particularly when compared to direct peers. While Hut 8's P/E is below the US software sector average, it is higher than what fundamentals might support. Any missteps in execution could lead to a compression in the stock's multiple, according to market observers according to Blockonomi.

What This Means for Investors

For investors, the deal represents a transformational opportunity for Hut 8, shifting it into a high-growth AI infrastructure sector. The partnership provides long-term cash flow visibility and the potential for significant expansion. However, investors should weigh the risks associated with overvaluation and execution challenges.

Benchmark's $85 price target implies roughly a 69% upside from recent closing prices, suggesting confidence in the company's pivot. The firm also noted that Hut 8's stock could serve as a play on AI adoption and the broader shift toward digital infrastructure. For those with a high-risk tolerance, the stock offers a compelling case for long-term growth according to Yahoo Finance.