TeraWulf Plummets 10.5%: Earnings Shockwaves and AI Pivot Fuel Volatility

Summary
• TeraWulf (WULF) slumps 10.57% to $15.99, its lowest since February 2024
• Q4 loss widens to $0.28/share vs. $0.13 expected, revenue misses by 17.71%
• HPC lease revenue jumps 35% to $9.7M, signaling strategic shift to AI infrastructure
• Options frenzy: 275K contracts traded, 163% volume surge in 24 hours

Today’s selloff in TeraWulf reflects a stark disconnect between its aggressive AI infrastructure pivot and near-term financial realities. While HPC lease revenue growth and $12.8B in contracted long-term revenue highlight strategic momentum, the stock’s sharp decline underscores investor skepticism over execution risks and non-cash accounting distortions. With the 52-week high at $18.51 now 16% below current levels, the battle between AI optimism and earnings reality is intensifying.

Earnings Shock and Strategic Reassessment
TeraWulf’s 10.57% intraday plunge stems from a dual shock: a 28-cent-per-share loss (triple the expected deficit) and a 17.71% revenue miss, despite a 35% sequential rise in HPC lease revenue. The stock’s collapse reflects investor recalibration of its AI infrastructure narrative against near-term financial pressures. While management emphasizes $12.8B in contracted long-term revenue and Google-backed leases, the GAAP net loss of $661.4M—driven by a $429.8M non-cash warrant valuation hit—has triggered short-term skepticism. The market is now weighing whether the company’s $3.7B cash hoard and 522 MW of contracted HPC capacity can offset near-term operational losses and Bitcoin mining volatility.

IT Services Sector Mixed as TeraWulf Dives
The IT Services sector (XIT) edged down 0.47% as of 20:18 ET, with IBM (-1.47%) and other cloud players underperforming. While TeraWulf’s AI pivot aligns with broader industry trends, its sharp selloff contrasts with more stable peers. The sector’s muted decline suggests investors are not broadly abandoning AI infrastructure but are selectively punishing high-risk, capital-intensive plays like WULF. IBM’s recent AI announcements and AWS’s OpenAI partnership highlight the sector’s long-term potential, but TeraWulf’s execution risks and leverage (4.45 debt-to-equity) make it a volatile outlier.

Options Playbook: Capitalizing on Volatility and Technical Breakouts
• 200-day SMA: $10.18 (far below), RSI: 79.22 (overbought), MACD: 0.896 (bullish divergence)
• Bollinger Bands: $12.29–$18.59 (current price near lower band), 30D support: $13.72–$13.84
• Kline pattern: Short-term bullish trend, long-term bullish

Bold ETFs: Bitwise Crypto Industry Innovators ETF (BITQ, -4.68%) and Bitwise Web3 ETF (BWEB, -3.38%) show crypto sector contagion. BITQ’s -4.68% decline mirrors WULF’s selloff, reflecting broader crypto miner pessimism.

Top Options:
• WULF20260306P15.5 (Put):
- Strike: $15.50, Expiry: 2026-03-06
- IV: 97.74% (high volatility), Leverage: 29.73%, Delta: -0.327 (moderate sensitivity), Theta: -0.0237 (moderate decay), Gamma: 0.1526 (high sensitivity to price swings), Turnover: 268K
- Why: High leverage and gamma make this put ideal for a 5% downside scenario (targeting $15.19). Payoff: $0.31/share if price drops to $15.19.
• WULF20260306P16 (Put):
- Strike: $16.00, Expiry: 2026-03-06
- IV: 97.56% (high volatility), Leverage: 21.51%, Delta: -0.4098 (strong sensitivity), Theta: -0.0199 (moderate decay), Gamma: 0.1646 (high sensitivity), Turnover: 819K
- Why: High liquidity and delta make this put a core position for a 5% downside (targeting $15.19). Payoff: $0.81/share if price drops to $15.19.

Action: Aggressive short-term bears should prioritize WULF20260306P16 for liquidity and leverage. A 5% downside scenario (to $15.19) would yield 5.1% returns on the $16 put. For a balanced approach, pair with a long-term buy on the 13.72–13.84 support zone, where RSI overbought conditions may trigger a rebound.

Backtest TeraWulf Stock Performance
The backtest of WULF's performance after a -11% intraday plunge from 2022 to now shows favorable results. The 3-Day win rate is 52.73%, the 10-Day win rate is 53.86%, and the 30-Day win rate is 58.38%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest was 22.16% over 30 days, suggesting that WULF has the potential for recovery and even gains after a significant downturn.

AI Pivot or Accounting Mirage? Watch These 3 Levels
TeraWulf’s 10.57% drop reflects a critical inflection point: the market is testing whether its AI infrastructure narrative can outpace near-term accounting distortions and Bitcoin volatility. The 13.72–13.84 support zone (30D SMA) is pivotal; a break below risks a 20% correction to $12.29 (lower Bollinger Band). Conversely, a rebound above $15.50 (current price) could reignite the 55.6% YTD rally. Sector leader IBM (-1.47%) offers a benchmark for IT Services resilience. Investors should prioritize the WULF20260306P16 put for short-term bearish exposure while monitoring the 13.72 support level for a potential reversal. Act now: Short-term bears target $15.19, long-term bulls watch $13.72 for a buy-the-dip entry.